Sunset review, Department of Corrections, sunset factors: a report to the Arizona Legislature

A REPORT
TO THE
ARIZONA LEGISLATURE
Debra K. Davenport
Auditor General
Sunset Review
Department of Corrections—
Sunset Factors
Performance Audit Division
September • 2011
REPORT NO. 11-08
The Auditor General is appointed by the Joint Legislative Audit Committee, a bipartisan committee composed of five senators and five
representatives. Her mission is to provide independent and impartial information and specific recommendations to improve the opera-tions
of state and local government entities. To this end, she provides financial audits and accounting services to the State and political
subdivisions, investigates possible misuse of public monies, and conducts performance audits of school districts, state agencies, and
the programs they administer.
The Joint Legislative Audit Committee
Audit Staff
Copies of the Auditor General’s reports are free.
You may request them by contacting us at:
Office of the Auditor General
2910 N. 44th Street, Suite 410 • Phoenix, AZ 85018 • (602) 553-0333
Additionally, many of our reports can be found in electronic format at:
www.azauditor.gov
Dale Chapman, Director
Kim Hildebrand, Manager and Contact Person
Kerry Howell
Senator Rick Murphy, Chair
Senator Andy Biggs
Senator Olivia Cajero Bedford
Senator Rich Crandall
Senator Kyrsten Sinema
Senator Russell Pearce (ex officio)
Representative Carl Seel, Vice Chair
Representative Eric Meyer
Representative Justin Olson
Representative Bob Robson
Representative Anna Tovar
Representative Andy Tobin (ex officio)
2910 NORTH 44th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553-0333 • FAX (602) 553-0051
MELANIE M. CHESNEY
DEPUTY AUDITOR GENERAL
DEBRA K. DAVENPORT, CPA
AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
September 26, 2011
Members of the Arizona Legislature
The Honorable Janice K. Brewer, Governor
Mr. Charles L. Ryan, Director
Department of Corrections
Transmitted herewith is a report of the Auditor General, A Sunset Review of the Department
of Corrections. This report is in response to a November 3, 2009, resolution of the Joint
Legislative Audit Committee and was conducted as part of the sunset review process
prescribed in Arizona Revised Statutes §41-2951 et seq.
As outlined in its response, the Department of Corrections plans to implement all of the
recommendations.
My staff and I will be pleased to discuss or clarify items in the report.
This report will be released to the public on September 27, 2011.
Sincerely,
Debbie Davenport
Auditor General
Attachment
TABLE OF CONTENTS
Introduction & Background 1
Sunset Factors 7
Appendix A: Methodology a-i
Agency Response
Tables
1 Schedule of Revenues, Expenditures, and Changes in Fund Balance
Fiscal Years 2009 through 2011
(In Thousands)
(Unaudited) 5
2 Grievances Appealed to Director
Fiscal Year 2010 17
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Office of the Auditor General
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Office of the Auditor General
The Department’s mission is to serve and protect the people of Arizona by
securely incarcerating convicted felons referred to its custody by the courts. In
addition to maintaining custody and control over inmates, the Department
provides programming, such as substance abuse counseling, and educational
and vocational opportunities, designed to support inmate accountability and a
successful reintegration back into the community. The Department also
supervises inmates who have earned the opportunity to spend up to 15
percent of their sentence in the community or who are released into the
community with electronic monitoring. As of June 30, 2011, the Department
housed 40,181 inmates in ten state-run prisons and five private facilities.
Additionally, it supervised 5,808 inmates in the community.
Organization
The Department consists of four divisions that report to the director, as well as
six offices that support the director and deputy director. The Department
reported 10,238 full-time equivalent (FTE) positions for fiscal year 2011,
including 840 vacancies as of June 30, 2011.
The Department’s four divisions are:
• Administrative Services Division (189 FTEs, 16 vacancies)—This
division manages various administrative functions for the Department
such as information technology; financial services; engineering and
facilities; and planning, budget, and research. Using factors such as
historical inmate population growth and legislative and sentencing
policies, the division develops 10-year projections of future prison
population growth and makeup and determines whether the State’s
prison system has sufficient beds at the appropriate custody level based
on the projected growth. The division also oversees inmate banking.
Inmates receive deposits of wages or funds into their accounts, which are
earned from jobs while in prison or sent to them from friends or family, and
the Department is responsible for accounting for and distributing these
monies for items such as restitution to victims, child support, utility
payments, copays for medical care, and inmate store purchases. Further,
the division is involved in constructing new prisons, monitoring construction
of private prisons, renovating/remodeling the Department’s ten prisons,
and providing janitorial and maintenance services. The division also
develops the Department’s annual building capital renewal budget
Department incarcerates and supervises
offenders
The Office of the Auditor
General has conducted a
sunset review of the
Department of Corrections
(Department) using the
criteria in Arizona’s sunset
law. The analysis of these
sunset factors was
conducted pursuant to a
November 3, 2009,
resolution of the Joint
Legislative Audit
Committee and prepared
as part of the sunset review
process prescribed in
Arizona Revised Statutes
(A.R.S.) §41-2951 et seq.
This report includes
responses to the sunset
factors specified in A.R.S.
§41-2954 and is the final in
a series of three reports on
the Department. The first
report examined Arizona’s
prison population growth,
and the second report
addressed the
Department’s oversight of
security operations at both
private and state-run
prisons.
Scope and Objectives
INTRODUCTION
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State of Arizona
request, which provides information on the Department’s capital improvement
needs, including building renewal.
• Offender Operations Division (8,717 FTEs, 560 vacancies)—This division is
responsible for the operation and security of state-run prisons; oversees the
private prisons under contract with the Department; and ensures the accurate
release, re-entry, and transition and supervision of offenders released to the
community. Committed offenders referred to the Department are classified into
various custody levels and assigned to a prison. The custody level assigned is
based on several factors, including an inmate’s most serious current and prior
offense(s), history of escapes, and institutional violence. The division also
calculates inmates’ sentence length and release date. The division is also
responsible for staffing each state-run prison.
The Contract Beds Bureau within this division monitors the performance of the
private prisons that the Department contracts with and their adherence to
department policies and procedures. In addition, the Community Corrections
Unit within this division retains and monitors custody of inmates who are paroled
to finish their sentences in the community. Inmates may earn the opportunity,
through good behavior and satisfactory progress in their individualized
corrections plan while in prison, to spend up to 15 percent of their sentence in
the community under the supervision of the Community Corrections Unit.
• Support Services Division (418 FTEs, 51 vacancies)—This division
administers the Department’s personnel functions, such as human resources,
and staff training and development for its employees; and provides a continuum
of work, education, and training opportunities and counseling and treatment
services to inmates. Treatment services include counseling and treatment for
sex offenders, substance abusers, and offenders convicted of driving under the
influence. Training for entry-level correctional staff is delivered at the Department’s
Correctional Officers Training Academy (COTA), located near Tucson. The
Department continuously trains staff to meet its needs, with classes starting
every 2 weeks at COTA. In fiscal year 2011, 1,200 recruits graduated from
COTA.
This division also operates Arizona Correctional Industries (ACI). ACI is a self-supporting
enterprise that provides opportunities for eligible inmates to develop
job skills and good work habits. ACI work activities include call centers, printing,
farming, and furniture making. Many of ACI’s businesses are located within
prison facilities; however, it also partners with the private sector to provide
employment opportunities. For example, inmates work at Hickman’s Egg
Ranch, Eurofresh Farms, and Greater Auto Auction.
The division also provides educational opportunities for inmates. For example,
it provides functional literacy classes to inmates who have not received a
minimum 8th-grade equivalency score in reading, language, or math. Inmates
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Office of the Auditor General
must have a high school diploma or a general equivalency diploma (GED) before
being able to work for ACI or hold other jobs available in the prisons. If inmates
do not have a diploma, they are encouraged to study for the GED while in prison.1
• Health Services Division (777 FTEs, 189 vacancies)—This division provides
healthcare for the inmate population, including general medical and emergency
treatment, dental services, mental healthcare, and pharmacy services. Healthcare
is available at each state-run and private prison and inmates pay a $4 copay for
medical services.2 Medical facilities are staffed with nurses and medical providers
24 hours a day. Each inmate receives a medical assessment upon being admitted
to department custody and then receives services on an as-needed basis after
that. Although the division offers a wide array of services at the prisons, all facilities
depend upon community hospitals for emergency care, consultations, and
in-patient treatment. Laws 2011, Ch. 278, requires the Department to privatize
healthcare services, and as of August 2011, the Department was developing a
Request For Proposals (RFP) for this service.
The Department has six additional offices that report directly to either the director or
the deputy director. These offices are:
• Victim Services Office (2 FTEs, 0 vacancies)—This office offers services to
crime victims and survivors such as victim notification and information about
offender release, changes in inmate status or custody, and answers about
restitution. The office works with the prison units to present classes to inmates on
the “Impact of Crime on Victims.” According to the Department, at these classes,
crime victims discuss the long-term impact that crime has had on their lives in an
effort to help keep inmates accountable and to help inmates understand the
consequences of their actions.
• Constituent Services Office (3 FTEs, 0 vacancies)—This office provides
guidance to the public on how to contact an inmate or visit an inmate in prison. It
also investigates concerns from the public and inmates’ families and friends
regarding confinement conditions. In fiscal year 2010, this office reported handling
30,650 requests for information and help, most of which—almost 97 percent—
were handled through a simple referral to the lowest level of command at a prison
or through an explanation or referral to information. This office also publishes a
handbook available on the Department’s Web site that serves as a guide about
inmate life and the corrections system.
• Office of the Inspector General (108 FTEs, 20 vacancies)—This office
investigates crimes occurring on prison property or in the prisons and also
1 According to department information, 62 percent of inmates do not meet the 8th-grade functional literacy standards when
admitted.
2 Inmates who suffer from chronic medical conditions, such as diabetes, cancer, allergies, etc., are exempt from paying for
healthcare for that condition.
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State of Arizona
investigates administrative allegations of impropriety or misconduct. In fiscal
year 2011, the office investigated 2,899 cases, of which 1,474 were criminal
cases and 1,425 were other investigations, such as allegations of neglect of
duty or responsibility for a security breach.1 This office also conducts annual
audits of each state-run and private prison, evaluating individual prison
compliance with department policies and procedures in various areas such as
key and tool control, inmate management, security devices, inmate classification,
and inmate counts (see Auditor General Report No. 11-07 for more information
on these annual audits).
• Office of the General Counsel (13 FTEs, 2 vacancies)—This office provides
legal advice to the director and deputy director on liability issues, analyzes and
reviews written legal directives for compliance with legal requirements, and
reviews potential settlements of lawsuits against the Department. This office
also handles the investigative aspect of inmate grievance and disciplinary
appeals to the director.
• Legislative Liaison Office (1 FTE, 0 vacancies)—This office coordinates and
prepares legislation the Department promotes. This office also monitors
legislation that would have an effect on the Department, works to answer
legislative inquiries, and maintains relationships with legislators on the
Department’s behalf.
• Media Relations Office (6 FTEs, 2 vacancies)—This office handles internal
and external communications for the Department. For example, this office
handles media requests for information about the Department, telephone
interviews with inmates, and requests to photograph department property. This
office also coordinates media appearances by the director and other department
employees.
Budget
As shown in Table 1 (see page 5), the Department received nearly $945 million in net
revenues in fiscal year 2011, with almost all of the revenues coming from State
General Fund and Corrections Fund appropriations. Specifically, in fiscal year 2011,
the Department received approximately $892 million from State General Fund
appropriations, an increase of nearly $17 million from fiscal year 2010. In addition,
the Department received approximately $24 million of appropriations from the
Corrections Fund, a decrease of approximately $4 million from fiscal year 2010. The
Department collects certain other revenues that are remitted to the State General
1 Most criminal cases, such as a minor assault upon an inmate by another inmate, are resolved through the Department’s
disciplinary system. According to the Department, the Office of the Inspector General also refers approximately 200 to
250 criminal cases per year to the county prosecuting attorneys.
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Office of the Auditor General
Table 1: Schedule of Revenues, Expenditures, and Changes in Fund Balance1
Fiscal Years 2009 through 2011
(In Thousands)
(Unaudited)
1 The table includes all department financial activity except the Prisoner Spendable Accounts Fund because these monies
are held for others and are not available for the Department’s use. In addition, it does not include the Arizona Correctional
Industries Revolving Fund because that fund is managed as a self-supporting operation.
2 Amounts are equal to the expenditures from the appropriated funds. Monies in the Corrections Fund primarily consist of
sales taxes collected on alcohol and tobacco products. Use of the monies is restricted for correctional facilities or state-operated
juvenile facilities.
3 The 2010 amount includes $50 million received in fiscal year 2010 from the American Recovery and Reinvestment Act
State Fiscal Stabilization Fund Program.
4 The Department remits certain revenues to the State General Fund, the majority of which are from a partial federal
reimbursement for the State’s cost of incarceration of criminal aliens in accordance with A.R.S. §35-142(A).
5 Consists of transfers to the State General Fund in accordance with Laws 2008, Ch. 285, §§24 and 46; Laws 2009, Ch. 11,
§110, 1st S.S., Ch. 1, §§ 4, 5, and 7, and 5th S.S., Ch. 1, §2; and Laws 2010, 7th S.S., Ch. 1, §§113 and 148, and Ch. 3,
§7.
6 Primarily consists of monies transferred to the Arizona Health Care Cost Containment System (AHCCCS). AHCCCS, the
Department’s third-party administrator for inmate healthcare, pays claims for inmate medical services.
Source: Auditor General staff analysis of the Arizona Financial Information System (AFIS) Accounting Event Transaction File for
fiscal years 2009 through 2011 and the AFIS Management Information System Status of General Ledger—Trial
Balance screen for fiscal years 2009 through 2011.
2009 2010 2011
Revenues:
State General Fund appropriations2 $ 9 22,095 $ 875,374 $ 892,338
Corrections Fund appropriations2 26,724 28,504 24,398
Fines, forfeits, and penalties 1 9,400 14,819 1 4,104
Intergovernmental3 15,734 65,754 12,909
Interest, rental, and other investment income 4 ,525 3 ,345 2 ,333
Tobacco sales taxes 3 ,359 3 ,407 3 ,307
Charges for goods and services 2 ,480 2 ,673 3 ,218
Commissions 1 ,798 3 ,673 3 ,885
Other 1 ,778 5 39 1,124
Gross revenues 9 97,893 9 98,088 9 57,616
Remittances to the State General Fund4 (14,598) (14,809) (12,642)
Net revenues 9 83,295 9 83,279 9 44,974
Expenditures and transfers:
Personal services and related benefits 590,339 5 75,876 5 96,958
Professional and outside services 2 01,123 1 95,285 1 42,379
Travel 217 213 2 13
Food 39,329 41,194 4 3,980
Aid to organizations and individuals 5 ,730 1,819 2 40
Other operating 86,149 1 03,434 1 08,639
Capital and noncapital outlay 5 ,446 11,748 1 5,403
Total expenditures 928,333 9 29,569 9 07,812
Transfers to the State General Fund5 2,954 3,785 9
Transfers to other state agencies6 54,566 46,669 24,424
Total expenditures and transfers 9 85,853 9 80,023 9 32,245
Net change in fund balance (2,558) 3,256 1 2,729
Fund balance, beginning of year 6 ,522 3 ,964 7 ,220
Fund balance, end of year $ 3 ,964 $ 7 ,220 $ 1 9,949
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State of Arizona
Fund. For example, in fiscal year 2011, nearly $13 million was remitted to the State General
Fund. According to the Department, the majority of the remittances were from a partial
federal reimbursement for the State’s cost of incarcerating criminal aliens. In fiscal year
2010, the Department also received $50 million from the American Recovery and
Reinvestment Act State Fiscal Stabilization Fund Program.
During fiscal year 2011, the Department spent nearly $908 million and transferred more
than $24 million to other agencies. Most of the monies transferred to other agencies
consisted of payments to the Arizona Health Care Cost Containment System for inmate
healthcare. Approximately 64 percent of its expenditures, including transfers, were for
personal services and related benefits. The Department also spent approximately $142
million in fiscal year 2011 for professional and outside services. The majority of these
expenditures were paid for private prisons. Further, the Department was required to
transfer more than $6.7 million during fiscal years 2009 through 2011 to the State General
Fund in accordance with laws.
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Office of the Auditor General
1. The objective and purpose in establishing the Department and the
extent to which the objective and purpose are met by private
enterprises in other states.
The Department of Corrections was established pursuant to Laws 1968,
Ch. 198 (A.R.S. §41-1602), which consolidated independently run prisons
into a single department responsible for incarcerating offenders as
directed by the courts. The Department’s statutory purpose is to serve as
the correctional program for the State and to provide staff and administration
relating to the institutionalization, rehabilitation, and community supervision
functions of all adult offenders. Consistent with its statutory purpose, the
Department’s mission is “to serve and protect the people of Arizona by
securely incarcerating convicted felons, by providing structured
programming designed to support inmate accountability and successful
community reintegration, and by providing effective supervision for those
offenders conditionally released from prison.”
The Department has five goals in carrying out its mission:
• To maintain effective custody and control over inmates in an
environment that is safe, secure, and humane.
• To require inmate participation in self-improvement programming
opportunities and services, including work, education, substance
abuse treatment, sex offender treatment, and spiritual access
designed to prepare inmates to be responsible citizens upon release.
• To provide cost-effective constitutionally mandated correctional
healthcare.
• To maintain effective community supervision of offenders, facilitate
their successful transition from prison to the community, and return
offenders when necessary to prison to protect the public.
• To provide leadership direction, resource management, and support
for department employees to enable the Department to serve and
protect the people of the State of Arizona and to provide compre-hensive
victim services and victim–focused restorative justice
programs that hold offenders accountable.
According to the Bureau of Justice Statistics Bulletin Prisoners in 2009, all
50 states have a correctional authority that maintains jurisdiction over
Sunset factor analysis
In accordance with Arizona
Revised Statutes (A.R.S.)
§41-2954, the Legislature
should consider the factors
included in this report in
determining whether the
Department of Corrections
(Department) should be
continued or terminated.
Auditors’ analysis of the
sunset factors found strong
performance by the
Department with regard to
many of these factors,
including changes it made
to its policies and
procedures during the audit
to help ensure it complies
with statutory requirements
for checking that inmate
store prices do not exceed
retail prices and for
spending inmate store
proceeds that it receives.
In addition to the
recommendations in this
report, the Department
needs to address the
recommendations directed
to it in the other two audit
reports issued as part of
this sunset review (see
Reports No. 10-08 and No.
11-07).
Sunset Factors
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State of Arizona
prisoners, although only 32 states use private prisons to house inmates.1 Similar
to other states, Arizona uses private prisons to house some of its minimum- and
medium-security inmates. As of December 31, 2009, Arizona ranked third
among all states in the number of inmates it housed in private prisons.2 At that
time, the Department housed 8,971 inmates in private prisons, or more than 22
percent of its total inmate population. However, by June 30, 2011, the number
declined, and Arizona had 5,915 inmates, or 18.9 percent, housed in private
prisons. The number of inmates in private prisons declined because construction
was completed in early 2010 on 4,000 state-operated prison beds and the
Department received funding in fiscal year 2011 to begin filling these beds.
According to the Department, the percentage of inmates housed in private
facilities should increase to more than 20 percent by 2015 once it contracts for
an additional 5,000 in-state private prison beds as required by statute and these
private facilities become operational.3
2. The extent to which the Department has met its statutory objective and
purpose and the efficiency with which it has operated.
The Department has generally fulfilled its statutory objective and purpose to
provide the staff and functions related to the institutionalization, rehabilitation,
and community supervision of offenders. On June 30, 2011, the Department
housed 40,181 inmates in state-operated or privately operated prison facilities
and had 5,808 parolees under supervision in the community.
The Department has operated in an efficient manner. For example, to
accommodate the tremendous growth that has occurred in the State’s prison
system, the State constructed several new prison complexes and has contracted
for thousands of private prison beds while the Department also added temporary
beds—beds in excess of what a facility is rated to house—to existing prison
facilities. The Department has expanded the prison system to accommodate
this growth while decreasing the per-capita per-day cost of housing an inmate.
This has saved the State money. Specifically, in 1986, the per-capita per-day
cost of housing an inmate was $42.46. Although this amount increased to
$64.98 per day in fiscal year 2009, when adjusted for inflation, the 2009 per-capita
cost decreased to $32.98.4 The per-capita per-day cost to house an
inmate has continued to decrease and was $60.73 in fiscal year 2010.5
1 Bureau of Justice Statistics. (2010). Prisoners in 2009 [NCJ 231675]. Washington, DC: United States Department of
Justice, Office of Justice Programs.
2 These rankings are published annually and the 2010 ranking had not been issued as of August 2011.
3 Laws 2009, 3rd S.S., Ch. 6, §37, requires the Department to award a contract for 5,000 prison beds in Arizona.
4 The Office of the Auditor General’s September 2010 performance audit on prison population growth reported that the
per-capita per-day cost of housing an inmate in fiscal year 2009 was $64.96 (see Report No. 10-08). However, the
Department has since updated its per-capita per-day cost of housing an inmate in fiscal year 2009 to $64.98.
5 Arizona Department of Corrections, Bureau of Planning, Budget and Research. (2011). FY 2010 Operating per capita
cost report: Cost identification and comparison of state and private contract beds. Phoenix, AZ: Author.
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Office of the Auditor General
Additionally, according to the Department, to promote efficient operations, it has
relied on private contracts for a broad range of goods and services, used inmate
labor and inmate-produced goods, and placed responsibility for more costs on
inmates. For example, the Department privatized inmate telephone services in
1999 at no cost to the Department. This produced estimated revenues of nearly
$3.7 million in fiscal year 2010 for the Department’s Activities and Recreation
Fund.1 In addition, through Arizona Correctional Industries (ACI), the Department
reported that it employed an average of 1,792 inmates a day in fiscal year 2011
who helped produce various goods and services used by the Department and
other state agencies. For example, ACI operates a bakery that provides bread and
other baked goods to the prisons and a manufacturing plant that produces the
mattresses that the inmates sleep on. To help recover costs and as authorized by
statute, the Department also charges inmates a $2-per-month utility fee for
personal appliances, such as a radio or fan.
However, auditors identified some issues facing the Department as well as areas
for review or improvement. Specifically:
• Arizona’s prison population has grown dramatically from fiscal years
1979 through 2010—The Office of the Auditor General’s September 2010
performance audit on prison population growth found that the prison
population grew at a faster rate than Arizona’s general population between
fiscal years 1979 and 2010 (see Report No. 10-08). Specifically, the prison
population increased from 3,377 inmates in fiscal year 1979 to 40,477
inmates in fiscal year 2010. According to Arizona Department of Economic
Security estimates, Arizona’s general population more than doubled between
fiscal years 1980 and 2008. However, during this same time, the State’s
prison population increased more than tenfold. To address this growth, the
Legislature has significantly increased the amount of State General Fund
monies it spends on department operations. According to Joint Legislative
Budget Committee data, State General Fund corrections operating
expenditures totaled more than $41.4 million in fiscal year 1979. This
accounted for 4.3 percent of State General Fund spending in that fiscal year.
For fiscal year 2011, State General Fund corrections operating expenditures
totaled more than $892.3 million, accounting for 10.5 percent of all State
General Fund spending for the fiscal year. Auditors presented the Legislature
and the Department with several options to address prison population
growth:
◦ Expanding the prison system—The Legislature could build more
prison facilities or contract for more prison beds.2 This is estimated to
cost an additional $975 million between fiscal years 2012 and 2017, but
1 The Department’s Central Office Activities and Recreation Fund is used to purchase equipment for recreation, libraries,
and education. In addition, it funds the victim notification system.
2 Laws 2009, 3rd S.S., Ch. 6, §37, calls for the award of a contract for 5,000 prison beds. The Department expects to award
a contract after September 16, 2011.
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State of Arizona
actual costs could be higher. If the Legislature proceeded with this
option, it should consider directing the Department to further study
and analyze the costs for the State to build and run prison facilities
compared to private prison beds to determine which option would be
the most cost-effective while still ensuring public safety.
◦ Diverting more nonviolent, low-risk offenders or reducing the time
that they serve—Since 1996, with the passage of Proposition 200, the
State has sought to divert nonviolent drug offenders into probation and
treatment instead of prison. For example, some nonviolent, low-risk
offenders who maintain good behavior and meet other criteria may be
released 3 months earlier than their sentences require. The Legislature
could consider expanding this option to other nonviolent, low-risk
offenders, such as those who are convicted of property crimes like
burglary, theft, and fraud that are often associated with substance
abuse. This may require changes to the State’s sentencing laws. The
Legislature could consider other alternatives to expand early release,
including revising truth-in-sentencing laws to reduce the amount of
time nonviolent, low-risk offenders serve. A permanent sentencing
commission could help the Legislature review sentencing laws and
monitor their impact upon the prison population.
◦ Expanding the use of nonprison alternatives—Substance abuse
treatment, home arrest with electronic monitoring, and day reporting
centers are examples of nonprison alternatives the Legislature could
consider. These could be used in lieu of prison sentences or as a
means of early release from prison. The Legislature could direct the
Department and/or courts to study the matter and determine the right
mix of options for Arizona.
◦ Reducing the number of parole revocations—Inmates spend a
median of 5 months on community supervision or parole. However,
parole revocations accounted for 15 percent of prison admissions in
fiscal year 2010. Parole can be revoked for violating the conditions of
release, such as failing to meet with a parole officer, using illegal
substances, or engaging in criminal behavior. Although the Department
has developed policies and procedures to address parole violations,
expanding the Department’s alternatives for responding to them may
help reduce prison admissions and associated costs. These include
nonprison alternatives such as residential treatment facilities, probation,
home arrest, and day reporting centers.
• Department has improved oversight of private prisons, but can further
strengthen monitoring—In the wake of the July 2010 escapes from the
Kingman private prison, auditors reviewed the Department’s oversight and
monitoring of private prisons. The Office of the Auditor General’s September
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Office of the Auditor General
2011 performance audit of the Department’s oversight of prison security
operations found that the Department had taken steps prior to and after the
escapes to improve its oversight of the State’s five contracted private prisons,
but it should further improve its oversight (see Report No. 11-07). For
example, prior to the Kingman private prison escapes, the Department
reported enhancing its monitoring of private prisons, which resulted in
deficiency notices being issued to the Kingman private prison for incidents
that occurred in March 2009 and January 2010. After the escapes, the
Department assessed security operations at all five private prisons and found
several security deficiencies and noncompliance with department policies
and procedures.
Additionally, the Department improved its monitoring of both the private and
state-run prisons by introducing the Green Amber Red (GAR) inspection
program. The GAR is essentially a monitoring checklist designed to assess
private prison compliance in various operational areas. Department staff
complete the GAR assessments through multiple inspections over the
course of a month. The color-coded system is designed to ensure that
findings result in corrective action and are reported to the appropriate prison
and department staff. Findings identified through GAR inspections conducted
during February and March 2011 include the failure to properly search the
personal property or verify the identity of persons entering the prison, to store
tools, to inventory keys, to document security device inspections, and to
ensure inoperative security devices are repaired in a timely manner.
As part of an effort started prior to the escapes, the Department revised its
annual audit procedures and developed a new audit tool that measures
actual private prison performance against department policies and
procedures. Although similar in design to the GAR, it does not use color-coded
findings and includes more questions than the GAR.
In addition to these efforts, the Department should:
◦ Carry out its plans to revise its written policies and procedures in January
2012 to reflect changes to the annual audit process. In doing so, the
Department should ensure the revised policies and procedures describe
when follow-up actions should occur, who should perform follow-up
activities, and how the results of these follow-up activities should be
reported.
◦ Continue developing and implementing formal training for its contract
monitoring staff. After the escapes, the Department changed the
experience and qualification requirements for the supervising contract
monitor position, and developed formal training for contract monitoring
staff, which is scheduled to begin in September 2011.
page 12
State of Arizona
◦ Continue its efforts to compare private and state-run prison services
every 2 years and submit the comparisons to the Joint Legislative
Budget Committee as required by statute. According to A.R.S. §41-
1609.01(K), this comparison shall be used to determine “if the
contractor is providing at least the same quality of services as this
state at a lower cost or if the contractor is providing services superior
in quality to those provided by this state at essentially the same cost.”
The Department reported that it plans to issue the first comparison
report by January 2012 and that its implementation of the GAR
inspection and revised annual audit procedures will assist it in
gathering some of the information that it must consider in the
comparison.
• Department should continue its efforts to improve compliance with
security policies and procedures at state-run prisons—The Department
has implemented policies and procedures related to security operations
and monitors correctional officer compliance with these policies and
procedures to help ensure compliance. However, department and auditors’
reviews identified instances of noncompliance at state-run prisons, ranging
from less-than-thorough searches of incoming personal property to not
following procedures for tools and keys. For example, department policies
and procedures require that the personal property of all employees be
cleared through a metal detector and be inspected prior to the person
being permitted entry into a prison unit. Although these policies are
intended to stop the introduction of cellphones, drugs, and other
contraband, auditors observed poorly conducted searches of incoming
correctional officers at one prison unit, and department inspectors found
similar noncompliance with these requirements at 12 of the 17 units
inspected during three department audits conducted between January and
March 2011.
In addition, although policies and procedures require correctional officers
to conduct inventories of all keys at the beginning and ending of each shift,
department reviews have documented examples in which key policies and
procedures were not followed. For example, three department audits
conducted between January and March 2011 reported various key control
findings, including inaccurate master key inventory records and records
that did not list the location of the matching locking devices, missing
checkout and return information, and inmates in possession of keys without
written approval from authorized officials. Correctional officers must
maintain strict control of keys because keys in inmates’ hands increase the
risk of escape or can give inmates access to officers, staff, and other
inmates for possible assaults. To strengthen compliance with its policies
and procedures, the Department should:
page 13
Office of the Auditor General
◦ Implement its plans to analyze data from monitoring activities to identify
systemic or repeat noncompliance, and further investigate causes of
noncompliance to ensure appropriate corrective action is taken.
◦ Provide training staff with the results of its monitoring activities and revise
its tool for assessing training needs based on monitoring results.
Additionally, the Department should provide additional leadership
training for supervisors.
◦ Continue with its efforts to ensure that post orders, which describe
specific procedures for carrying out a particular job, clearly and concisely
convey the critical duties and responsibilities required by department
policy and that completion of these duties is documented.
• Department established or revised policies and procedures to better
ensure compliance with inmate store requirements—The Department
contracts with a private vendor to operate stores for inmates at each of its
prison complexes. These stores sell items such as food, toiletries, stationery
supplies, and tobacco products for inmates’ use. Although the Department
reported that it had an internal process for checking that inmate store prices
did not exceed retail prices as statutorily required, this process was not
written in policy and the Department did not document its price comparisons.
During the audit, the Department developed written procedures for checking
and documenting inmate store prices to help ensure that the inmate store
prices do not exceed retail prices, and it should ensure these new procedures
are followed. Additionally, during the audit, the Department revised its inmate
store proceeds policies and procedures to ensure they are consistent with
statutory requirements regarding how inmate store proceeds can be spent.
It should also ensure that these expenditures continue to comply with these
requirements. Specifically:
◦ Department should ensure it follows new procedures for checking
and documenting compliance with inmate stores statutory pricing
requirements—A.R.S. §41-1604.02 allows the contractor, with direction
from the department director, to set the prices for items offered at the
Department’s inmate stores, but requires that the prices be no higher
than prices of similar retail products. Auditors’ tests of 15 inmate store
items’ prices found that only one item was priced higher than retail
prices. Specifically, auditors reviewed prices for inmate store products
such as tobacco, disposable razors, and some food items and found
that only a television set, which was the most expensive of the 15 items
tested, was priced higher than comparable retail prices. A comparison
of the Department’s inmate store television to the same model offered
by two other prison suppliers found that the inmate store television price
page 14
State of Arizona
was between 47 and 65 percent higher than the prices offered by the
other suppliers—$245 compared to $166.56 and $148.50.
The Department reported that its evaluation of the inmate store
television determined the price to be acceptable and that it considered
other non-price factors in making this determination. These factors
included that the television is a unique specialty item with limited
suppliers, that it was one product in a comprehensive state contract,
and that it is an item that the Department considers an essential tool
in inmate control and management that could not be eliminated.
However, although the Department stated that it conducted price
comparisons for this and other products with local retail prices, it did
not retain documentation supporting the price comparisons or when
they were conducted. As a result, auditors could not assess how these
non-price factors or other factors, such as shipping, return policy, and
product warranty, affected the pricing of the Department’s television. In
April 2011, the Department developed procedures for conducting and
documenting its price comparisons of inmate store products, and it
should ensure that these new procedures are followed.
◦ Department should ensure that expenditures of inmate store
proceeds continue to comply with requirements—A.R.S.
§41.1604.02 allows the Department to earn a profit on inmate store
sales, which it received through a contractual 13.5 percent commission
on the cost of items sold, and also specifies how the Department can
spend these monies.1 Specifically, A.R.S. §41-1604.02 permits inmate
store proceeds to “be used at the director’s discretion for inmate
activities, incentive pay increases for corrections officers, equipment to
enhance safety for both department personnel and inmates or other
official needs as required.”2 However, although statute was revised in
2004 to expand the permitted uses of inmate store proceeds, the
Department had not updated its policies and procedures to reflect this
statutory change. Auditors’ review of a sample of 124 fiscal year 2010
department expenditures totaling $279,000 found that all of these
expenditures complied with statute, but more than $56,000 in
expenditures were not authorized by department policy. In March
2011, the Department revised its policies and procedures to further
define allowable expenditures for inmate store proceeds and to make
them consistent with statute. The Department should ensure that
1 The Department received a 13.5 percent commission on all inmate store sales with the exception of clothing sales, for
which it received a 10 percent commission. The Department awarded a new inmate stores contract in August 2011,
which provides for a 16 percent department commission on the cost of items sold at inmate stores.
2 A.R.S. §41-1604.02 was amended by Laws 2011, Ch. 33, §15, to require the director to annually transfer $500,000 from
the Inmate Stores Proceeds Fund to its Building Renewal Fund before spending the money on the other items allowed
by statute.
page 15
Office of the Auditor General
expenditures of inmate store proceeds continue to comply with statute
and with its revised policies and procedures.
3. The extent to which the Department serves the entire State rather than
specific interests.
The Department serves the entire State by confining offenders from all 15 counties
as directed by the courts. It operates 10 prison complexes and contracts with an
additional 5 private prison facilities. These facilities are located throughout the
State, although inmates are placed according to their custody level and availability
of beds in the system, and not with regard for their home county. Confinement
contributes to public safety and the benefit of all citizens of the State by removing
offenders convicted of crimes from society and preventing them from further
victimizing the public.
The Department also serves the entire State by supervising inmates who are
released into various communities on parole throughout the State. Department
staff and offices are located in 11 cities across the State including Douglas,
Flagstaff, Kingman, Phoenix, Prescott, Tucson, and Yuma. As previously stated,
inmates may spend up to 15 percent of their sentence in the community.
Department parole officers ensure that inmates have a suitable residence upon
release, and meet with released inmates to ensure that they understand and
follow the terms of their release, such as the need to find employment, stay in
touch with their parole officer, abstain from alcohol and drugs, and remain law-abiding.
Inmates who are unable or unwilling to follow the terms of their release
may have their parole revoked and be returned to prison.
4. The extent to which rules adopted by the Department are consistent with the
legislative mandate.
Pursuant to A.R.S. §41-1005, the Department is exempt from the rulemaking
requirements of the Administrative Procedures Act. Although the Department
does not promulgate rules, it establishes department orders to implement
requirements imposed by statute. For example, Department Order (DO) 801
prescribes the Department’s responsibility to classify prisoners by risk and
custody levels, consistent with A.R.S. §41-1604.06(B), and DO 905, which is
consistent with A.R.S. §31-239, allows the Department to charge a $2 monthly
utility fee to inmates with personal appliances, such as a radio or fan.
5. The extent to which the Department has encouraged input from the public
before adopting its rules and the extent to which it has informed the public
as to its actions and their expected impact on the public.
Although the Department is exempt from the rulemaking process, its internal
policies affect the public, its staff, and inmates. As such, the Department posts
changes in policy in the prison housing units at least 30 days before they take
page 16
State of Arizona
effect so inmates and staff may familiarize themselves with the changes. Further,
the Department posts its revised policies on its Web site for public viewing.
According to department staff, although the Department does not seek public
input on its policies, any input received may be taken into account during future
revisions.
The Department’s Web site also serves as a resource for individuals seeking
information on current or former inmates. The Department maintains a database
that can be accessed through its Web site and that allows the public to search
for current or former inmates, and see the inmate’s picture, description,
sentencing information, and prison disciplinary record.
Additionally, inmates’ families and friends and the public can access information
through the Department’s Constituent Services Office. The Constituent Services
Office’s purpose is to address the concerns of the general public and inmates’
friends and family regarding confinement and supervision conditions to reduce
inmate litigation, increase agency transparency, and improve department
operations and outcomes. The Constituent Services Office communicates with
the Department’s executive staff and facility supervisory correctional staff to
resolve issues such as denied visitation and to explain calculated release dates.
The Constituent Services Office also provides guidance to individuals who are
unfamiliar with the corrections system on such matters as how to send an
inmate mail, what an inmate can have as property, and parole supervision
issues.
6. The extent to which the Department has been able to investigate and
resolve complaints that are within its jurisdiction.
The Department receives complaints from its inmates and the public. Specifically:
• According to department policy and an interview with department staff,
inmates shall first attempt to resolve their grievances informally through
either a discussion with corrections staff or by submitting the grievance in
writing to corrections staff. If unresolved, the inmate may submit his/her
complaint to the correctional officer III on his/her specific unit. If the
grievance cannot be resolved informally, then an official formal grievance is
filed with the unit’s grievance coordinator, to be decided by the deputy
warden. If the inmate is still unsatisfied, he/she may then file a formal
grievance to be decided by the warden. The final step an inmate may
pursue is to appeal to the director. The inmate must file a grievance appeal
form, which is forwarded with all previous investigations material and
responses to the central office appeals officer, who will review and
investigate the appealed grievance on behalf of the director.
According to the Department, it received 4,235 formal inmate grievances in
fiscal year 2010. The majority of grievances concerned inmate
page 17
Office of the Auditor General
property—1,600 grievances—and healthcare—761
grievances. Seventy-seven percent of formal
grievances, or 3,149, were resolved at the facility
level. As illustrated in Table 2 (see page 17), 986
grievances were appealed to the director. However,
according to department data, most grievances
appealed to the director were denied. For example,
the director denied 83 percent of the healthcare
grievances that were appealed and 96 percent of
the non-healthcare grievances.
• The Department’s Constituent Services Office
investigates concerns of the general public and
inmates’ friends and family regarding a variety of
issues such as visitation, mail, time computation,
and healthcare. In fiscal year 2010, the Constituent
Services Office reported handling 30,650 public
inquiries. Almost 97 percent of these inquiries were
resolved through referral to the lowest level of
command at the prison facility or through
information referral or explanation by a Constituent
Services Office staff member. The remaining 1,052
inquiries—3.4 percent—required additional
investigation by the Constituent Services Office to
resolve.
7. The extent to which the Attorney General or any other
applicable agency of state government has the authority to prosecute
actions under the enabling legislation.
According to A.R.S. §41-192, the Attorney General’s Office provides legal services
to the Department for various issues. According to Attorney General staff, its
Office offers advice on the effects of sentencing statutes and the implementation
of Department Orders that affect inmates. Further, the Attorney General represents
the Department in matters concerning death penalty appeals. According to the
Department, it also advises the Department on matters concerning public records
requested by the media.
Additionally, the Department refers approximately 200 to 250 cases annually to
county attorneys. These cases typically involve criminal acts alleged to have been
committed in or on prison property by inmates, department employees, or
visitors. These cases include charges such as homicide, aggravated assault
against staff, and promoting prison contraband, such as narcotics or cellphones.
As of May 2011, 240 open cases were being reviewed or prosecuted by the
county attorneys in the State. According to the Department, in fiscal year 2010,
Table 2: Grievances Appealed to Director
Fiscal Year 2010
Source: Auditor General staff analysis of unaudited
department grievance data for fiscal year 2010.
Healthcare
Grievances
Other
Grievances
Decided in
favor of the
inmate 24 21
Decided
partially in
favor of the
inmate 16 1
Denied 330 565
Returned as
incomplete
and
unprocessed 28 0
Returned to
unit to address
issue 0 1
Total 398 588
page 18
State of Arizona
the Department reimbursed four counties a total of more than $111,000 for
prosecuting cases.1
8. The extent to which the Department has addressed deficiencies in its
enabling statutes that prevent it from fulfilling its statutory mandate.
According to the Department, it has sought legislation regularly over the past
several years. From fiscal years 2006 through 2011, the Department proposed
30 bills, 15 of which were enacted. Some key pieces of legislation introduced
and enacted were:
• Laws 2007, Ch. 248—This law revised statute to expand the list of persons
prohibited from engaging in sexual contact with inmates to include not just
department employees and contractors, but also official visitors, volunteers,
and agency representatives. It also broadened the definition of sexual
contact and made it a Class 5 felony for a person to engage in sexual
conduct with an adult inmate. According to the Department, the intent of
this revision was to bring Arizona law into alignment with the federal Prison
Rape Elimination Act of 2003. This act required the development of
standards for the detection, prevention, punishment, and reduction of
prison rape and called for a zero-tolerance policy regarding rape in prisons,
jails, and other confinement facilities. It also standardized the collection and
dissemination of information on the problem of prison rape for federal data
collection.
• Laws 2010, Ch. 56—This legislation changed the definition of contraband
in statute to include a “wireless communication device” and “multimedia
storage device.” Possession of a cellphone on prison property is now a
Class 5 felony. According to the Department, this legislation was designed
to combat the problem of inmates obtaining contraband cellphones and
engaging in unmonitored criminal communications.
• Laws 2010, Ch. 57—This law established the Community Corrections
Enhancement Fund, and increased inmate fees for community supervision,
parole, Global Positioning System (GPS) monitoring, and home arrest. The
charge for supervision increased from $30 to $65 per month, along with
additional increases in the charges for home arrest and GPS-monitored
parolees.
The Department has not yet determined if it will propose legislation in the 2012
session, but reported that it plans to continue to work with the Governor’s Office
and Legislature to privatize inmate healthcare services as required by Laws
2011, Ch. 278 (see Sunset Factor 12, pages 19 through 21, for more information).
It will also continue to work with stakeholders to implement Laws 2011, Ch. 33,
1 According to A.R.S. §31-227, the Department bears the cost of reimbursing the counties for prosecution.
page 19
Office of the Auditor General
which specifies that inmates sentenced to terms of 1 year or less in the
Department’s custody serve their sentences in the county jails unless the sheriff
of the sentencing county has an agreement in place to reimburse the Department
for the inmate’s sentence. Laws 2011, Ch. 33, will become effective July 1, 2012.
9. The extent to which changes are necessary in the laws of the Department to
adequately comply with the factors in the sunset law.
Audits conducted as part of the Department’s sunset review did not identify any
needed changes to its statutes. However, the Office of the Auditor General’s
September 2010 performance audit on prison population growth discusses a
number of options for addressing Arizona’s growing prison population, some of
which may require statutory changes (see Report No. 10-08). Options presented
for legislative and department consideration included expanding the State’s
prison system; diverting more nonviolent, low-risk offenders from prison and/or
reducing the term they serve; expanding the use of nonprison alternatives; and
creating a sentencing commission. Some of these options would require changes
to the State’s sentencing laws.
10. The extent to which the termination of the Department would significantly
affect the public’s health, safety, or welfare.
Terminating the Department would significantly affect the public’s safety. The
Department provides confinement and community supervision for felony offenders,
a vital service that increases the public’s safety. Imprisonment contributes to
public safety by removing felony offenders from society and preventing them from
further victimizing the public.
11. The extent to which the level of regulation exercised by the Department
compares to other states and is appropriate and whether less or more
stringent levels of regulation would be appropriate.
The Department is not a regulatory agency; therefore, this factor does not apply.
12. The extent to which the Department has used private contractors in the
performance of its duties as compared to other states and how more
effective use of private contractors could be accomplished.
The Department uses private contractors to provide various services, including:
(1) privately operated prisons that perform many functions related to housing
inmates, (2) inmate food service, (3) inmate health services, (4) inmate work-based
education, and (5) prison security perimeter maintenance.1 The
1 Laws 2011, Ch. 278, requires the privatization of inmate health services. As of August 2011, the Department was
developing a Request For Proposals.
page 20
State of Arizona
Department’s use of private contractors has increased since fiscal year 2000. In
fiscal year 2000, the Department’s privatized services totaled approximately
$58.6 million, or about 10 percent of the Department’s expenditures. In fiscal
year 2010, privatized services totaled approximately $334.2 million, or about 34
percent of the Department’s expenditures, including transfers to the Arizona
Health Care Cost Containment System (AHCCCS) for inmate healthcare.
In some cases the Department’s use of private contractors generates revenue.
For example, the Department contracts with a private vendor to operate stores
for inmates at each of its prison complexes. These stores sell items such as
food, toiletries, and tobacco products for inmates’ use. A.R.S. §41.1604.02
allows the Department to earn a profit on inmate store sales, which it received
through a contractual 13.5 percent commission on the cost of items sold.1 In
fiscal year 2010, the Department received more than $3.6 million in commissions
for the Department’s Inmate Stores Proceeds Fund. In addition, the Department
has used a private vendor for inmate phone services since 1999. In fiscal year
2010, this contract resulted in nearly $3.7 million in commissions for the
Department’s Central Offices Activities and Recreation Fund.
Contracting for correctional programs and services has been in place for many
years and is not uncommon. According to a 1996 survey and report on
privatization and contracting in corrections, every state except Colorado
reported that they contracted for some type of program or service.2,3 For
example, similar to Arizona, 32 other states contract for private prisons.4
To obtain more current information on states’ privatization efforts in corrections,
auditors contacted three states comparable to Arizona based on prison
populations—Michigan, Virginia, and North Carolina.5 Based on information
reported by these three states, Arizona appears to contract in more areas. For
example, similar to Arizona, these three states contracted for health services,
pharmacy supplies or services, and telecommunications. However, unlike these
states, only Arizona contracts for food services at all of its prisons, although
Virginia reported contracting for food services at 3 of its 42 prison facilities.6 In
1 The Department received a 13.5 percent commission on all inmate store sales with the exception of clothing sales, for
which it received a 10 percent commission. The Department awarded a new inmate stores contract in August 2011,
which provides for a 16 percent department commission on the cost of items sold at inmate stores.
2 U.S. Department of Justice, National Institute of Corrections Information Center. (1996). Privatization and contracting in
corrections: Results of an NIC survey. Longmont, CO: Author.
3 As of 1996, all states but Colorado contracted for some type of service or program. Auditors reviewed Colorado’s
Department of Corrections Fiscal Year 2011 budget request and verified that they now contract for various correctional
services and programs.
4 Bureau of Justice Statistics. (2010). Prisoners in 2009 [NCJ 231675]. Washington, DC: United States Department of
Justice, Office of Justice Programs.
5 States were selected based on their prison population as of December 31, 2009, according to the Bureau of Justice
Statistics Bulletin, Prisoners in 2009. Arizona’s prison population was 40,627 as of December 31, 2009. Auditors
contacted officials from the following three states: Michigan (prison population of 45,478), North Carolina (39,860), and
Virginia (38,092).
6 Michigan reported that they plan to issue a Request For Proposals to privatize food services in September 2011.
page 21
Office of the Auditor General
addition, compared to these three states, only Arizona contracts for inmate work-based
education.
Additionally, the Department will soon be contracting for additional private prison
beds and inmate healthcare. Laws 2009, 3rd S.S., Ch. 6, §37, requires the
Department to award a contract for 5,000 in-state prison beds. The Department
expects to award a contract after September 16, 2011. In addition, Laws 2011,
Ch. 278, requires the Department to privatize all correctional health services at a
cost that does not exceed the capped fee-for–service schedule adopted by
AHCCCS. As of August 2011, the Department was developing an RFP for this
service.
At least one Arizona correctional privatization effort has not been successful.
Specifically, Laws 2009, 3rd S.S., Ch. 6, §33, required the Arizona Department of
Administration (ADOA), in consultation with the Department, to issue a Request
for Information (RFI) to determine the feasibility of a concession agreement
allowing a private vendor to operate all or part of the prison system.1 The
legislation stated that this privatization should result in an annual cost efficiency to
the State, and that the cost efficiency should be split between the State and the
private vendor. After the Department presented information to the Joint Committee
on Capital Review (JCCR), JCCR gave a favorable review to the RFI for a State
Prison Concession Agreement per A.R.S. §38-431.03(A)(2), with modified
provisions. Consequently, ADOA, in consultation with the Department, issued an
RFI limiting those prisons that could be privatized to prisons that exclusively
housed minimum-and medium-custody inmates. However, based on the four
vendor responses received, ADOA and the Department determined that a
concession agreement was not feasible as allowed under statute and as the
prisons are currently structured. Consequently, Laws 2009, 3rd S.S., Ch. 6, §33,
was repealed by Laws 2010, 7th S.S., Ch. 6, §25.
Going forward, potential privatization areas should be carefully evaluated to
ensure the benefits of contracting outweigh the costs. Information from the other
states auditors interviewed point to the importance of evaluating the cost-effectiveness
of privatizing a service or function versus performing the service or
function in house. For example, a North Carolina official indicated that the state
no longer contracts for prison maintenance or private prison beds largely because
it cost more to contract for these services than for its corrections department to
perform them. Security issues were also a factor in eliminating North Carolina’s
contract for private prison beds. Similarly, the September 2010 Office of the
Auditor General report on prison population growth recommended that the
Legislature consider directing the Department to further study and analyze the
costs for the State to build and operate prisons compared to contracting with
private prisons to determine which option would be more cost-effective while still
ensuring public safety (see Report No 10-08).
1 This excluded Arizona State Prison Complex—Yuma.
Office of the Auditor General
The Department’s performance was analyzed in accordance with the statutory
sunset factors. Prior work on prison population growth (see Auditor General
Report No. 10-08) and department oversight of security operations at both
private and state-run prisons (see Auditor General Report No. 11-07) provided
information for this report. Auditors also reviewed the Department’s Web site,
including its Inmate Datasearch feature, daily count sheets, department-prepared
reports summarizing inmate grievance and constituent services
information, the Department’s Strategic Plan for FY 2012-2016, various reports
and documents, department policies and procedures, and various session
laws and statutes, and interviewed department management and staff as well
as staff at the Attorney General’s Office and State Procurement Office. In
addition, auditors reviewed reports from the Commission on Privatization and
Efficiency and the Fiscal Years 2010-2013 Master List of State Government
Programs; reviewed Privatization and Contracting in Corrections: Results of an
NIC Survey and the Bureau of Justice Statistics Bulletin Prisoners in 2009; and
compiled and analyzed information about the Department’s finances from the
Arizona Financial Information System (AFIS) Accounting Event Transaction File
for fiscal years 2009 through 2011 and the AFIS Management Information
System Status of General Ledger—Trial Balance screen for fiscal years 2009
through 2011.1,2 Finally, auditors contacted procurement staff in the Michigan,
North Carolina, and Virginia Departments of Correction to discuss the extent of
each state’s efforts to privatize services. These states have prison populations
similar in size to Arizona’s.
To determine if the Department complied with inmate store requirements,
using a June 15, 2010, inmate store price list, auditors compared prices for 15
items sold at the Department’s inmate stores to similar retail products sold in
the Phoenix area or on retail Web sites when prices were not available locally.3
Fourteen of the items were selected for review because they represented high
volume and high dollar sales for the period April 1, 2010 through September
30, 2010. One additional item was selected because it had been the source of
inmate complaints. Auditors also reviewed prison complex monthly bank
statements and corresponding documentation for July 1, 2009 through June
30, 2010; judgmentally selected 124 expenditure payments and compared
these expenditures to statutory and department requirements; interviewed
department administrators and staff; and examined department contract files
and request for proposals documents.
1 U.S. Department of Justice, National Institute of Corrections Information Center. (1996). Privatization and
contracting in corrections: Results of an NIC survey. Longmont, CO: Author.
2 Bureau of Justice Statistics. (2010). Prisoners in 2009 [NCJ 231675]. Washington, DC: United States
Department of Justice, Office of Justice Programs.
3 Auditors also compared the price for 1 of the 15 items, a television set, to a price from another state’s inmate
store vendor who supplies the same television set to its inmate population.
Methodology
This appendix provides
information on the methods
auditors used to meet the
audit objectives.
This performance audit was
conducted in accordance
with generally accepted
government auditing
standards. Those
standards require that we
plan and perform the audit
to obtain sufficient
appropriate evidence to
provide reasonable basis
for our findings and
conclusions based on our
audit objectives. We
believe that the evidence
obtained provides a
reasonable basis for our
findings and conclusions
based on our audit
objectives.
The Auditor General and
staff express appreciation
to the Department of
Corrections’ (Department)
Director and staff for their
cooperation and assistance
throughout the audit.
APPENDIX A
page a-i
State of Arizona
Auditors’ work on internal controls focused on the Department’s processes or
procedures for ensuring compliance with inmate store statutory requirements related
to pricing and profits. Conclusions on this work are included in Sunset Factor No. 2,
pages 13 through 14. Since information system data was not significant to auditors’
objectives, auditors did not conduct test work on information system controls.
page a-ii
AGENCY RESPONSE
Performance Audit Division reports issued within the last 24 months
Future Performance Audit Division reports
Arizona Department of Veterans’ Services—Veterans’ Donations and Military Family Relief Funds
Arizona Department of Veterans’ Services and Arizona Veterans’ Service Advisory Commission—Sunset
Factors
10-08 Department of Corrections—
Prison Population Growth
10-L1 Office of Pest Management—
Regulation
10-09 Arizona Sports and Tourism
Authority
11-01 Department of Public Safety—
Followup on Specific
Recommendations from
Previous Audits and Sunset
Factors
11-02 Arizona State Board of Nursing
11-03 Arizona Department of Veterans’
Services—Fiduciary Program
11-04 Arizona Medical Board
11-05 Pinal County Transportation
Excise Tax
11-06 Arizona Department of Veterans’
Services—Veteran Home
11-07 Department of Corrections—
Oversight of Security Operations
09-09 Arizona Department of Juvenile
Corrections—Suicide Prevention
and Violence and Abuse
Reduction Efforts
09-10 Arizona Department of Juvenile
Corrections—Sunset Factors
09-11 Department of Health Services—
Sunset Factors
10-01 Office of Pest Management—
Restructuring
10-02 Department of Public Safety—
Photo Enforcement Program
10-03 Arizona State Lottery
Commission and Arizona State
Lottery
10-04 Department of Agriculture—
Food Safety and Quality
Assurance Inspection Programs
10-05 Arizona Department of Housing
10-06 Board of Chiropractic Examiners
10-07 Arizona Department of
Agriculture—Sunset Factors

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A REPORT
TO THE
ARIZONA LEGISLATURE
Debra K. Davenport
Auditor General
Sunset Review
Department of Corrections—
Sunset Factors
Performance Audit Division
September • 2011
REPORT NO. 11-08
The Auditor General is appointed by the Joint Legislative Audit Committee, a bipartisan committee composed of five senators and five
representatives. Her mission is to provide independent and impartial information and specific recommendations to improve the opera-tions
of state and local government entities. To this end, she provides financial audits and accounting services to the State and political
subdivisions, investigates possible misuse of public monies, and conducts performance audits of school districts, state agencies, and
the programs they administer.
The Joint Legislative Audit Committee
Audit Staff
Copies of the Auditor General’s reports are free.
You may request them by contacting us at:
Office of the Auditor General
2910 N. 44th Street, Suite 410 • Phoenix, AZ 85018 • (602) 553-0333
Additionally, many of our reports can be found in electronic format at:
www.azauditor.gov
Dale Chapman, Director
Kim Hildebrand, Manager and Contact Person
Kerry Howell
Senator Rick Murphy, Chair
Senator Andy Biggs
Senator Olivia Cajero Bedford
Senator Rich Crandall
Senator Kyrsten Sinema
Senator Russell Pearce (ex officio)
Representative Carl Seel, Vice Chair
Representative Eric Meyer
Representative Justin Olson
Representative Bob Robson
Representative Anna Tovar
Representative Andy Tobin (ex officio)
2910 NORTH 44th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553-0333 • FAX (602) 553-0051
MELANIE M. CHESNEY
DEPUTY AUDITOR GENERAL
DEBRA K. DAVENPORT, CPA
AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
September 26, 2011
Members of the Arizona Legislature
The Honorable Janice K. Brewer, Governor
Mr. Charles L. Ryan, Director
Department of Corrections
Transmitted herewith is a report of the Auditor General, A Sunset Review of the Department
of Corrections. This report is in response to a November 3, 2009, resolution of the Joint
Legislative Audit Committee and was conducted as part of the sunset review process
prescribed in Arizona Revised Statutes §41-2951 et seq.
As outlined in its response, the Department of Corrections plans to implement all of the
recommendations.
My staff and I will be pleased to discuss or clarify items in the report.
This report will be released to the public on September 27, 2011.
Sincerely,
Debbie Davenport
Auditor General
Attachment
TABLE OF CONTENTS
Introduction & Background 1
Sunset Factors 7
Appendix A: Methodology a-i
Agency Response
Tables
1 Schedule of Revenues, Expenditures, and Changes in Fund Balance
Fiscal Years 2009 through 2011
(In Thousands)
(Unaudited) 5
2 Grievances Appealed to Director
Fiscal Year 2010 17
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Office of the Auditor General
The Department’s mission is to serve and protect the people of Arizona by
securely incarcerating convicted felons referred to its custody by the courts. In
addition to maintaining custody and control over inmates, the Department
provides programming, such as substance abuse counseling, and educational
and vocational opportunities, designed to support inmate accountability and a
successful reintegration back into the community. The Department also
supervises inmates who have earned the opportunity to spend up to 15
percent of their sentence in the community or who are released into the
community with electronic monitoring. As of June 30, 2011, the Department
housed 40,181 inmates in ten state-run prisons and five private facilities.
Additionally, it supervised 5,808 inmates in the community.
Organization
The Department consists of four divisions that report to the director, as well as
six offices that support the director and deputy director. The Department
reported 10,238 full-time equivalent (FTE) positions for fiscal year 2011,
including 840 vacancies as of June 30, 2011.
The Department’s four divisions are:
• Administrative Services Division (189 FTEs, 16 vacancies)—This
division manages various administrative functions for the Department
such as information technology; financial services; engineering and
facilities; and planning, budget, and research. Using factors such as
historical inmate population growth and legislative and sentencing
policies, the division develops 10-year projections of future prison
population growth and makeup and determines whether the State’s
prison system has sufficient beds at the appropriate custody level based
on the projected growth. The division also oversees inmate banking.
Inmates receive deposits of wages or funds into their accounts, which are
earned from jobs while in prison or sent to them from friends or family, and
the Department is responsible for accounting for and distributing these
monies for items such as restitution to victims, child support, utility
payments, copays for medical care, and inmate store purchases. Further,
the division is involved in constructing new prisons, monitoring construction
of private prisons, renovating/remodeling the Department’s ten prisons,
and providing janitorial and maintenance services. The division also
develops the Department’s annual building capital renewal budget
Department incarcerates and supervises
offenders
The Office of the Auditor
General has conducted a
sunset review of the
Department of Corrections
(Department) using the
criteria in Arizona’s sunset
law. The analysis of these
sunset factors was
conducted pursuant to a
November 3, 2009,
resolution of the Joint
Legislative Audit
Committee and prepared
as part of the sunset review
process prescribed in
Arizona Revised Statutes
(A.R.S.) §41-2951 et seq.
This report includes
responses to the sunset
factors specified in A.R.S.
§41-2954 and is the final in
a series of three reports on
the Department. The first
report examined Arizona’s
prison population growth,
and the second report
addressed the
Department’s oversight of
security operations at both
private and state-run
prisons.
Scope and Objectives
INTRODUCTION
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State of Arizona
request, which provides information on the Department’s capital improvement
needs, including building renewal.
• Offender Operations Division (8,717 FTEs, 560 vacancies)—This division is
responsible for the operation and security of state-run prisons; oversees the
private prisons under contract with the Department; and ensures the accurate
release, re-entry, and transition and supervision of offenders released to the
community. Committed offenders referred to the Department are classified into
various custody levels and assigned to a prison. The custody level assigned is
based on several factors, including an inmate’s most serious current and prior
offense(s), history of escapes, and institutional violence. The division also
calculates inmates’ sentence length and release date. The division is also
responsible for staffing each state-run prison.
The Contract Beds Bureau within this division monitors the performance of the
private prisons that the Department contracts with and their adherence to
department policies and procedures. In addition, the Community Corrections
Unit within this division retains and monitors custody of inmates who are paroled
to finish their sentences in the community. Inmates may earn the opportunity,
through good behavior and satisfactory progress in their individualized
corrections plan while in prison, to spend up to 15 percent of their sentence in
the community under the supervision of the Community Corrections Unit.
• Support Services Division (418 FTEs, 51 vacancies)—This division
administers the Department’s personnel functions, such as human resources,
and staff training and development for its employees; and provides a continuum
of work, education, and training opportunities and counseling and treatment
services to inmates. Treatment services include counseling and treatment for
sex offenders, substance abusers, and offenders convicted of driving under the
influence. Training for entry-level correctional staff is delivered at the Department’s
Correctional Officers Training Academy (COTA), located near Tucson. The
Department continuously trains staff to meet its needs, with classes starting
every 2 weeks at COTA. In fiscal year 2011, 1,200 recruits graduated from
COTA.
This division also operates Arizona Correctional Industries (ACI). ACI is a self-supporting
enterprise that provides opportunities for eligible inmates to develop
job skills and good work habits. ACI work activities include call centers, printing,
farming, and furniture making. Many of ACI’s businesses are located within
prison facilities; however, it also partners with the private sector to provide
employment opportunities. For example, inmates work at Hickman’s Egg
Ranch, Eurofresh Farms, and Greater Auto Auction.
The division also provides educational opportunities for inmates. For example,
it provides functional literacy classes to inmates who have not received a
minimum 8th-grade equivalency score in reading, language, or math. Inmates
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Office of the Auditor General
must have a high school diploma or a general equivalency diploma (GED) before
being able to work for ACI or hold other jobs available in the prisons. If inmates
do not have a diploma, they are encouraged to study for the GED while in prison.1
• Health Services Division (777 FTEs, 189 vacancies)—This division provides
healthcare for the inmate population, including general medical and emergency
treatment, dental services, mental healthcare, and pharmacy services. Healthcare
is available at each state-run and private prison and inmates pay a $4 copay for
medical services.2 Medical facilities are staffed with nurses and medical providers
24 hours a day. Each inmate receives a medical assessment upon being admitted
to department custody and then receives services on an as-needed basis after
that. Although the division offers a wide array of services at the prisons, all facilities
depend upon community hospitals for emergency care, consultations, and
in-patient treatment. Laws 2011, Ch. 278, requires the Department to privatize
healthcare services, and as of August 2011, the Department was developing a
Request For Proposals (RFP) for this service.
The Department has six additional offices that report directly to either the director or
the deputy director. These offices are:
• Victim Services Office (2 FTEs, 0 vacancies)—This office offers services to
crime victims and survivors such as victim notification and information about
offender release, changes in inmate status or custody, and answers about
restitution. The office works with the prison units to present classes to inmates on
the “Impact of Crime on Victims.” According to the Department, at these classes,
crime victims discuss the long-term impact that crime has had on their lives in an
effort to help keep inmates accountable and to help inmates understand the
consequences of their actions.
• Constituent Services Office (3 FTEs, 0 vacancies)—This office provides
guidance to the public on how to contact an inmate or visit an inmate in prison. It
also investigates concerns from the public and inmates’ families and friends
regarding confinement conditions. In fiscal year 2010, this office reported handling
30,650 requests for information and help, most of which—almost 97 percent—
were handled through a simple referral to the lowest level of command at a prison
or through an explanation or referral to information. This office also publishes a
handbook available on the Department’s Web site that serves as a guide about
inmate life and the corrections system.
• Office of the Inspector General (108 FTEs, 20 vacancies)—This office
investigates crimes occurring on prison property or in the prisons and also
1 According to department information, 62 percent of inmates do not meet the 8th-grade functional literacy standards when
admitted.
2 Inmates who suffer from chronic medical conditions, such as diabetes, cancer, allergies, etc., are exempt from paying for
healthcare for that condition.
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State of Arizona
investigates administrative allegations of impropriety or misconduct. In fiscal
year 2011, the office investigated 2,899 cases, of which 1,474 were criminal
cases and 1,425 were other investigations, such as allegations of neglect of
duty or responsibility for a security breach.1 This office also conducts annual
audits of each state-run and private prison, evaluating individual prison
compliance with department policies and procedures in various areas such as
key and tool control, inmate management, security devices, inmate classification,
and inmate counts (see Auditor General Report No. 11-07 for more information
on these annual audits).
• Office of the General Counsel (13 FTEs, 2 vacancies)—This office provides
legal advice to the director and deputy director on liability issues, analyzes and
reviews written legal directives for compliance with legal requirements, and
reviews potential settlements of lawsuits against the Department. This office
also handles the investigative aspect of inmate grievance and disciplinary
appeals to the director.
• Legislative Liaison Office (1 FTE, 0 vacancies)—This office coordinates and
prepares legislation the Department promotes. This office also monitors
legislation that would have an effect on the Department, works to answer
legislative inquiries, and maintains relationships with legislators on the
Department’s behalf.
• Media Relations Office (6 FTEs, 2 vacancies)—This office handles internal
and external communications for the Department. For example, this office
handles media requests for information about the Department, telephone
interviews with inmates, and requests to photograph department property. This
office also coordinates media appearances by the director and other department
employees.
Budget
As shown in Table 1 (see page 5), the Department received nearly $945 million in net
revenues in fiscal year 2011, with almost all of the revenues coming from State
General Fund and Corrections Fund appropriations. Specifically, in fiscal year 2011,
the Department received approximately $892 million from State General Fund
appropriations, an increase of nearly $17 million from fiscal year 2010. In addition,
the Department received approximately $24 million of appropriations from the
Corrections Fund, a decrease of approximately $4 million from fiscal year 2010. The
Department collects certain other revenues that are remitted to the State General
1 Most criminal cases, such as a minor assault upon an inmate by another inmate, are resolved through the Department’s
disciplinary system. According to the Department, the Office of the Inspector General also refers approximately 200 to
250 criminal cases per year to the county prosecuting attorneys.
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Office of the Auditor General
Table 1: Schedule of Revenues, Expenditures, and Changes in Fund Balance1
Fiscal Years 2009 through 2011
(In Thousands)
(Unaudited)
1 The table includes all department financial activity except the Prisoner Spendable Accounts Fund because these monies
are held for others and are not available for the Department’s use. In addition, it does not include the Arizona Correctional
Industries Revolving Fund because that fund is managed as a self-supporting operation.
2 Amounts are equal to the expenditures from the appropriated funds. Monies in the Corrections Fund primarily consist of
sales taxes collected on alcohol and tobacco products. Use of the monies is restricted for correctional facilities or state-operated
juvenile facilities.
3 The 2010 amount includes $50 million received in fiscal year 2010 from the American Recovery and Reinvestment Act
State Fiscal Stabilization Fund Program.
4 The Department remits certain revenues to the State General Fund, the majority of which are from a partial federal
reimbursement for the State’s cost of incarceration of criminal aliens in accordance with A.R.S. §35-142(A).
5 Consists of transfers to the State General Fund in accordance with Laws 2008, Ch. 285, §§24 and 46; Laws 2009, Ch. 11,
§110, 1st S.S., Ch. 1, §§ 4, 5, and 7, and 5th S.S., Ch. 1, §2; and Laws 2010, 7th S.S., Ch. 1, §§113 and 148, and Ch. 3,
§7.
6 Primarily consists of monies transferred to the Arizona Health Care Cost Containment System (AHCCCS). AHCCCS, the
Department’s third-party administrator for inmate healthcare, pays claims for inmate medical services.
Source: Auditor General staff analysis of the Arizona Financial Information System (AFIS) Accounting Event Transaction File for
fiscal years 2009 through 2011 and the AFIS Management Information System Status of General Ledger—Trial
Balance screen for fiscal years 2009 through 2011.
2009 2010 2011
Revenues:
State General Fund appropriations2 $ 9 22,095 $ 875,374 $ 892,338
Corrections Fund appropriations2 26,724 28,504 24,398
Fines, forfeits, and penalties 1 9,400 14,819 1 4,104
Intergovernmental3 15,734 65,754 12,909
Interest, rental, and other investment income 4 ,525 3 ,345 2 ,333
Tobacco sales taxes 3 ,359 3 ,407 3 ,307
Charges for goods and services 2 ,480 2 ,673 3 ,218
Commissions 1 ,798 3 ,673 3 ,885
Other 1 ,778 5 39 1,124
Gross revenues 9 97,893 9 98,088 9 57,616
Remittances to the State General Fund4 (14,598) (14,809) (12,642)
Net revenues 9 83,295 9 83,279 9 44,974
Expenditures and transfers:
Personal services and related benefits 590,339 5 75,876 5 96,958
Professional and outside services 2 01,123 1 95,285 1 42,379
Travel 217 213 2 13
Food 39,329 41,194 4 3,980
Aid to organizations and individuals 5 ,730 1,819 2 40
Other operating 86,149 1 03,434 1 08,639
Capital and noncapital outlay 5 ,446 11,748 1 5,403
Total expenditures 928,333 9 29,569 9 07,812
Transfers to the State General Fund5 2,954 3,785 9
Transfers to other state agencies6 54,566 46,669 24,424
Total expenditures and transfers 9 85,853 9 80,023 9 32,245
Net change in fund balance (2,558) 3,256 1 2,729
Fund balance, beginning of year 6 ,522 3 ,964 7 ,220
Fund balance, end of year $ 3 ,964 $ 7 ,220 $ 1 9,949
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State of Arizona
Fund. For example, in fiscal year 2011, nearly $13 million was remitted to the State General
Fund. According to the Department, the majority of the remittances were from a partial
federal reimbursement for the State’s cost of incarcerating criminal aliens. In fiscal year
2010, the Department also received $50 million from the American Recovery and
Reinvestment Act State Fiscal Stabilization Fund Program.
During fiscal year 2011, the Department spent nearly $908 million and transferred more
than $24 million to other agencies. Most of the monies transferred to other agencies
consisted of payments to the Arizona Health Care Cost Containment System for inmate
healthcare. Approximately 64 percent of its expenditures, including transfers, were for
personal services and related benefits. The Department also spent approximately $142
million in fiscal year 2011 for professional and outside services. The majority of these
expenditures were paid for private prisons. Further, the Department was required to
transfer more than $6.7 million during fiscal years 2009 through 2011 to the State General
Fund in accordance with laws.
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Office of the Auditor General
1. The objective and purpose in establishing the Department and the
extent to which the objective and purpose are met by private
enterprises in other states.
The Department of Corrections was established pursuant to Laws 1968,
Ch. 198 (A.R.S. §41-1602), which consolidated independently run prisons
into a single department responsible for incarcerating offenders as
directed by the courts. The Department’s statutory purpose is to serve as
the correctional program for the State and to provide staff and administration
relating to the institutionalization, rehabilitation, and community supervision
functions of all adult offenders. Consistent with its statutory purpose, the
Department’s mission is “to serve and protect the people of Arizona by
securely incarcerating convicted felons, by providing structured
programming designed to support inmate accountability and successful
community reintegration, and by providing effective supervision for those
offenders conditionally released from prison.”
The Department has five goals in carrying out its mission:
• To maintain effective custody and control over inmates in an
environment that is safe, secure, and humane.
• To require inmate participation in self-improvement programming
opportunities and services, including work, education, substance
abuse treatment, sex offender treatment, and spiritual access
designed to prepare inmates to be responsible citizens upon release.
• To provide cost-effective constitutionally mandated correctional
healthcare.
• To maintain effective community supervision of offenders, facilitate
their successful transition from prison to the community, and return
offenders when necessary to prison to protect the public.
• To provide leadership direction, resource management, and support
for department employees to enable the Department to serve and
protect the people of the State of Arizona and to provide compre-hensive
victim services and victim–focused restorative justice
programs that hold offenders accountable.
According to the Bureau of Justice Statistics Bulletin Prisoners in 2009, all
50 states have a correctional authority that maintains jurisdiction over
Sunset factor analysis
In accordance with Arizona
Revised Statutes (A.R.S.)
§41-2954, the Legislature
should consider the factors
included in this report in
determining whether the
Department of Corrections
(Department) should be
continued or terminated.
Auditors’ analysis of the
sunset factors found strong
performance by the
Department with regard to
many of these factors,
including changes it made
to its policies and
procedures during the audit
to help ensure it complies
with statutory requirements
for checking that inmate
store prices do not exceed
retail prices and for
spending inmate store
proceeds that it receives.
In addition to the
recommendations in this
report, the Department
needs to address the
recommendations directed
to it in the other two audit
reports issued as part of
this sunset review (see
Reports No. 10-08 and No.
11-07).
Sunset Factors
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State of Arizona
prisoners, although only 32 states use private prisons to house inmates.1 Similar
to other states, Arizona uses private prisons to house some of its minimum- and
medium-security inmates. As of December 31, 2009, Arizona ranked third
among all states in the number of inmates it housed in private prisons.2 At that
time, the Department housed 8,971 inmates in private prisons, or more than 22
percent of its total inmate population. However, by June 30, 2011, the number
declined, and Arizona had 5,915 inmates, or 18.9 percent, housed in private
prisons. The number of inmates in private prisons declined because construction
was completed in early 2010 on 4,000 state-operated prison beds and the
Department received funding in fiscal year 2011 to begin filling these beds.
According to the Department, the percentage of inmates housed in private
facilities should increase to more than 20 percent by 2015 once it contracts for
an additional 5,000 in-state private prison beds as required by statute and these
private facilities become operational.3
2. The extent to which the Department has met its statutory objective and
purpose and the efficiency with which it has operated.
The Department has generally fulfilled its statutory objective and purpose to
provide the staff and functions related to the institutionalization, rehabilitation,
and community supervision of offenders. On June 30, 2011, the Department
housed 40,181 inmates in state-operated or privately operated prison facilities
and had 5,808 parolees under supervision in the community.
The Department has operated in an efficient manner. For example, to
accommodate the tremendous growth that has occurred in the State’s prison
system, the State constructed several new prison complexes and has contracted
for thousands of private prison beds while the Department also added temporary
beds—beds in excess of what a facility is rated to house—to existing prison
facilities. The Department has expanded the prison system to accommodate
this growth while decreasing the per-capita per-day cost of housing an inmate.
This has saved the State money. Specifically, in 1986, the per-capita per-day
cost of housing an inmate was $42.46. Although this amount increased to
$64.98 per day in fiscal year 2009, when adjusted for inflation, the 2009 per-capita
cost decreased to $32.98.4 The per-capita per-day cost to house an
inmate has continued to decrease and was $60.73 in fiscal year 2010.5
1 Bureau of Justice Statistics. (2010). Prisoners in 2009 [NCJ 231675]. Washington, DC: United States Department of
Justice, Office of Justice Programs.
2 These rankings are published annually and the 2010 ranking had not been issued as of August 2011.
3 Laws 2009, 3rd S.S., Ch. 6, §37, requires the Department to award a contract for 5,000 prison beds in Arizona.
4 The Office of the Auditor General’s September 2010 performance audit on prison population growth reported that the
per-capita per-day cost of housing an inmate in fiscal year 2009 was $64.96 (see Report No. 10-08). However, the
Department has since updated its per-capita per-day cost of housing an inmate in fiscal year 2009 to $64.98.
5 Arizona Department of Corrections, Bureau of Planning, Budget and Research. (2011). FY 2010 Operating per capita
cost report: Cost identification and comparison of state and private contract beds. Phoenix, AZ: Author.
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Office of the Auditor General
Additionally, according to the Department, to promote efficient operations, it has
relied on private contracts for a broad range of goods and services, used inmate
labor and inmate-produced goods, and placed responsibility for more costs on
inmates. For example, the Department privatized inmate telephone services in
1999 at no cost to the Department. This produced estimated revenues of nearly
$3.7 million in fiscal year 2010 for the Department’s Activities and Recreation
Fund.1 In addition, through Arizona Correctional Industries (ACI), the Department
reported that it employed an average of 1,792 inmates a day in fiscal year 2011
who helped produce various goods and services used by the Department and
other state agencies. For example, ACI operates a bakery that provides bread and
other baked goods to the prisons and a manufacturing plant that produces the
mattresses that the inmates sleep on. To help recover costs and as authorized by
statute, the Department also charges inmates a $2-per-month utility fee for
personal appliances, such as a radio or fan.
However, auditors identified some issues facing the Department as well as areas
for review or improvement. Specifically:
• Arizona’s prison population has grown dramatically from fiscal years
1979 through 2010—The Office of the Auditor General’s September 2010
performance audit on prison population growth found that the prison
population grew at a faster rate than Arizona’s general population between
fiscal years 1979 and 2010 (see Report No. 10-08). Specifically, the prison
population increased from 3,377 inmates in fiscal year 1979 to 40,477
inmates in fiscal year 2010. According to Arizona Department of Economic
Security estimates, Arizona’s general population more than doubled between
fiscal years 1980 and 2008. However, during this same time, the State’s
prison population increased more than tenfold. To address this growth, the
Legislature has significantly increased the amount of State General Fund
monies it spends on department operations. According to Joint Legislative
Budget Committee data, State General Fund corrections operating
expenditures totaled more than $41.4 million in fiscal year 1979. This
accounted for 4.3 percent of State General Fund spending in that fiscal year.
For fiscal year 2011, State General Fund corrections operating expenditures
totaled more than $892.3 million, accounting for 10.5 percent of all State
General Fund spending for the fiscal year. Auditors presented the Legislature
and the Department with several options to address prison population
growth:
◦ Expanding the prison system—The Legislature could build more
prison facilities or contract for more prison beds.2 This is estimated to
cost an additional $975 million between fiscal years 2012 and 2017, but
1 The Department’s Central Office Activities and Recreation Fund is used to purchase equipment for recreation, libraries,
and education. In addition, it funds the victim notification system.
2 Laws 2009, 3rd S.S., Ch. 6, §37, calls for the award of a contract for 5,000 prison beds. The Department expects to award
a contract after September 16, 2011.
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State of Arizona
actual costs could be higher. If the Legislature proceeded with this
option, it should consider directing the Department to further study
and analyze the costs for the State to build and run prison facilities
compared to private prison beds to determine which option would be
the most cost-effective while still ensuring public safety.
◦ Diverting more nonviolent, low-risk offenders or reducing the time
that they serve—Since 1996, with the passage of Proposition 200, the
State has sought to divert nonviolent drug offenders into probation and
treatment instead of prison. For example, some nonviolent, low-risk
offenders who maintain good behavior and meet other criteria may be
released 3 months earlier than their sentences require. The Legislature
could consider expanding this option to other nonviolent, low-risk
offenders, such as those who are convicted of property crimes like
burglary, theft, and fraud that are often associated with substance
abuse. This may require changes to the State’s sentencing laws. The
Legislature could consider other alternatives to expand early release,
including revising truth-in-sentencing laws to reduce the amount of
time nonviolent, low-risk offenders serve. A permanent sentencing
commission could help the Legislature review sentencing laws and
monitor their impact upon the prison population.
◦ Expanding the use of nonprison alternatives—Substance abuse
treatment, home arrest with electronic monitoring, and day reporting
centers are examples of nonprison alternatives the Legislature could
consider. These could be used in lieu of prison sentences or as a
means of early release from prison. The Legislature could direct the
Department and/or courts to study the matter and determine the right
mix of options for Arizona.
◦ Reducing the number of parole revocations—Inmates spend a
median of 5 months on community supervision or parole. However,
parole revocations accounted for 15 percent of prison admissions in
fiscal year 2010. Parole can be revoked for violating the conditions of
release, such as failing to meet with a parole officer, using illegal
substances, or engaging in criminal behavior. Although the Department
has developed policies and procedures to address parole violations,
expanding the Department’s alternatives for responding to them may
help reduce prison admissions and associated costs. These include
nonprison alternatives such as residential treatment facilities, probation,
home arrest, and day reporting centers.
• Department has improved oversight of private prisons, but can further
strengthen monitoring—In the wake of the July 2010 escapes from the
Kingman private prison, auditors reviewed the Department’s oversight and
monitoring of private prisons. The Office of the Auditor General’s September
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Office of the Auditor General
2011 performance audit of the Department’s oversight of prison security
operations found that the Department had taken steps prior to and after the
escapes to improve its oversight of the State’s five contracted private prisons,
but it should further improve its oversight (see Report No. 11-07). For
example, prior to the Kingman private prison escapes, the Department
reported enhancing its monitoring of private prisons, which resulted in
deficiency notices being issued to the Kingman private prison for incidents
that occurred in March 2009 and January 2010. After the escapes, the
Department assessed security operations at all five private prisons and found
several security deficiencies and noncompliance with department policies
and procedures.
Additionally, the Department improved its monitoring of both the private and
state-run prisons by introducing the Green Amber Red (GAR) inspection
program. The GAR is essentially a monitoring checklist designed to assess
private prison compliance in various operational areas. Department staff
complete the GAR assessments through multiple inspections over the
course of a month. The color-coded system is designed to ensure that
findings result in corrective action and are reported to the appropriate prison
and department staff. Findings identified through GAR inspections conducted
during February and March 2011 include the failure to properly search the
personal property or verify the identity of persons entering the prison, to store
tools, to inventory keys, to document security device inspections, and to
ensure inoperative security devices are repaired in a timely manner.
As part of an effort started prior to the escapes, the Department revised its
annual audit procedures and developed a new audit tool that measures
actual private prison performance against department policies and
procedures. Although similar in design to the GAR, it does not use color-coded
findings and includes more questions than the GAR.
In addition to these efforts, the Department should:
◦ Carry out its plans to revise its written policies and procedures in January
2012 to reflect changes to the annual audit process. In doing so, the
Department should ensure the revised policies and procedures describe
when follow-up actions should occur, who should perform follow-up
activities, and how the results of these follow-up activities should be
reported.
◦ Continue developing and implementing formal training for its contract
monitoring staff. After the escapes, the Department changed the
experience and qualification requirements for the supervising contract
monitor position, and developed formal training for contract monitoring
staff, which is scheduled to begin in September 2011.
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State of Arizona
◦ Continue its efforts to compare private and state-run prison services
every 2 years and submit the comparisons to the Joint Legislative
Budget Committee as required by statute. According to A.R.S. §41-
1609.01(K), this comparison shall be used to determine “if the
contractor is providing at least the same quality of services as this
state at a lower cost or if the contractor is providing services superior
in quality to those provided by this state at essentially the same cost.”
The Department reported that it plans to issue the first comparison
report by January 2012 and that its implementation of the GAR
inspection and revised annual audit procedures will assist it in
gathering some of the information that it must consider in the
comparison.
• Department should continue its efforts to improve compliance with
security policies and procedures at state-run prisons—The Department
has implemented policies and procedures related to security operations
and monitors correctional officer compliance with these policies and
procedures to help ensure compliance. However, department and auditors’
reviews identified instances of noncompliance at state-run prisons, ranging
from less-than-thorough searches of incoming personal property to not
following procedures for tools and keys. For example, department policies
and procedures require that the personal property of all employees be
cleared through a metal detector and be inspected prior to the person
being permitted entry into a prison unit. Although these policies are
intended to stop the introduction of cellphones, drugs, and other
contraband, auditors observed poorly conducted searches of incoming
correctional officers at one prison unit, and department inspectors found
similar noncompliance with these requirements at 12 of the 17 units
inspected during three department audits conducted between January and
March 2011.
In addition, although policies and procedures require correctional officers
to conduct inventories of all keys at the beginning and ending of each shift,
department reviews have documented examples in which key policies and
procedures were not followed. For example, three department audits
conducted between January and March 2011 reported various key control
findings, including inaccurate master key inventory records and records
that did not list the location of the matching locking devices, missing
checkout and return information, and inmates in possession of keys without
written approval from authorized officials. Correctional officers must
maintain strict control of keys because keys in inmates’ hands increase the
risk of escape or can give inmates access to officers, staff, and other
inmates for possible assaults. To strengthen compliance with its policies
and procedures, the Department should:
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Office of the Auditor General
◦ Implement its plans to analyze data from monitoring activities to identify
systemic or repeat noncompliance, and further investigate causes of
noncompliance to ensure appropriate corrective action is taken.
◦ Provide training staff with the results of its monitoring activities and revise
its tool for assessing training needs based on monitoring results.
Additionally, the Department should provide additional leadership
training for supervisors.
◦ Continue with its efforts to ensure that post orders, which describe
specific procedures for carrying out a particular job, clearly and concisely
convey the critical duties and responsibilities required by department
policy and that completion of these duties is documented.
• Department established or revised policies and procedures to better
ensure compliance with inmate store requirements—The Department
contracts with a private vendor to operate stores for inmates at each of its
prison complexes. These stores sell items such as food, toiletries, stationery
supplies, and tobacco products for inmates’ use. Although the Department
reported that it had an internal process for checking that inmate store prices
did not exceed retail prices as statutorily required, this process was not
written in policy and the Department did not document its price comparisons.
During the audit, the Department developed written procedures for checking
and documenting inmate store prices to help ensure that the inmate store
prices do not exceed retail prices, and it should ensure these new procedures
are followed. Additionally, during the audit, the Department revised its inmate
store proceeds policies and procedures to ensure they are consistent with
statutory requirements regarding how inmate store proceeds can be spent.
It should also ensure that these expenditures continue to comply with these
requirements. Specifically:
◦ Department should ensure it follows new procedures for checking
and documenting compliance with inmate stores statutory pricing
requirements—A.R.S. §41-1604.02 allows the contractor, with direction
from the department director, to set the prices for items offered at the
Department’s inmate stores, but requires that the prices be no higher
than prices of similar retail products. Auditors’ tests of 15 inmate store
items’ prices found that only one item was priced higher than retail
prices. Specifically, auditors reviewed prices for inmate store products
such as tobacco, disposable razors, and some food items and found
that only a television set, which was the most expensive of the 15 items
tested, was priced higher than comparable retail prices. A comparison
of the Department’s inmate store television to the same model offered
by two other prison suppliers found that the inmate store television price
page 14
State of Arizona
was between 47 and 65 percent higher than the prices offered by the
other suppliers—$245 compared to $166.56 and $148.50.
The Department reported that its evaluation of the inmate store
television determined the price to be acceptable and that it considered
other non-price factors in making this determination. These factors
included that the television is a unique specialty item with limited
suppliers, that it was one product in a comprehensive state contract,
and that it is an item that the Department considers an essential tool
in inmate control and management that could not be eliminated.
However, although the Department stated that it conducted price
comparisons for this and other products with local retail prices, it did
not retain documentation supporting the price comparisons or when
they were conducted. As a result, auditors could not assess how these
non-price factors or other factors, such as shipping, return policy, and
product warranty, affected the pricing of the Department’s television. In
April 2011, the Department developed procedures for conducting and
documenting its price comparisons of inmate store products, and it
should ensure that these new procedures are followed.
◦ Department should ensure that expenditures of inmate store
proceeds continue to comply with requirements—A.R.S.
§41.1604.02 allows the Department to earn a profit on inmate store
sales, which it received through a contractual 13.5 percent commission
on the cost of items sold, and also specifies how the Department can
spend these monies.1 Specifically, A.R.S. §41-1604.02 permits inmate
store proceeds to “be used at the director’s discretion for inmate
activities, incentive pay increases for corrections officers, equipment to
enhance safety for both department personnel and inmates or other
official needs as required.”2 However, although statute was revised in
2004 to expand the permitted uses of inmate store proceeds, the
Department had not updated its policies and procedures to reflect this
statutory change. Auditors’ review of a sample of 124 fiscal year 2010
department expenditures totaling $279,000 found that all of these
expenditures complied with statute, but more than $56,000 in
expenditures were not authorized by department policy. In March
2011, the Department revised its policies and procedures to further
define allowable expenditures for inmate store proceeds and to make
them consistent with statute. The Department should ensure that
1 The Department received a 13.5 percent commission on all inmate store sales with the exception of clothing sales, for
which it received a 10 percent commission. The Department awarded a new inmate stores contract in August 2011,
which provides for a 16 percent department commission on the cost of items sold at inmate stores.
2 A.R.S. §41-1604.02 was amended by Laws 2011, Ch. 33, §15, to require the director to annually transfer $500,000 from
the Inmate Stores Proceeds Fund to its Building Renewal Fund before spending the money on the other items allowed
by statute.
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Office of the Auditor General
expenditures of inmate store proceeds continue to comply with statute
and with its revised policies and procedures.
3. The extent to which the Department serves the entire State rather than
specific interests.
The Department serves the entire State by confining offenders from all 15 counties
as directed by the courts. It operates 10 prison complexes and contracts with an
additional 5 private prison facilities. These facilities are located throughout the
State, although inmates are placed according to their custody level and availability
of beds in the system, and not with regard for their home county. Confinement
contributes to public safety and the benefit of all citizens of the State by removing
offenders convicted of crimes from society and preventing them from further
victimizing the public.
The Department also serves the entire State by supervising inmates who are
released into various communities on parole throughout the State. Department
staff and offices are located in 11 cities across the State including Douglas,
Flagstaff, Kingman, Phoenix, Prescott, Tucson, and Yuma. As previously stated,
inmates may spend up to 15 percent of their sentence in the community.
Department parole officers ensure that inmates have a suitable residence upon
release, and meet with released inmates to ensure that they understand and
follow the terms of their release, such as the need to find employment, stay in
touch with their parole officer, abstain from alcohol and drugs, and remain law-abiding.
Inmates who are unable or unwilling to follow the terms of their release
may have their parole revoked and be returned to prison.
4. The extent to which rules adopted by the Department are consistent with the
legislative mandate.
Pursuant to A.R.S. §41-1005, the Department is exempt from the rulemaking
requirements of the Administrative Procedures Act. Although the Department
does not promulgate rules, it establishes department orders to implement
requirements imposed by statute. For example, Department Order (DO) 801
prescribes the Department’s responsibility to classify prisoners by risk and
custody levels, consistent with A.R.S. §41-1604.06(B), and DO 905, which is
consistent with A.R.S. §31-239, allows the Department to charge a $2 monthly
utility fee to inmates with personal appliances, such as a radio or fan.
5. The extent to which the Department has encouraged input from the public
before adopting its rules and the extent to which it has informed the public
as to its actions and their expected impact on the public.
Although the Department is exempt from the rulemaking process, its internal
policies affect the public, its staff, and inmates. As such, the Department posts
changes in policy in the prison housing units at least 30 days before they take
page 16
State of Arizona
effect so inmates and staff may familiarize themselves with the changes. Further,
the Department posts its revised policies on its Web site for public viewing.
According to department staff, although the Department does not seek public
input on its policies, any input received may be taken into account during future
revisions.
The Department’s Web site also serves as a resource for individuals seeking
information on current or former inmates. The Department maintains a database
that can be accessed through its Web site and that allows the public to search
for current or former inmates, and see the inmate’s picture, description,
sentencing information, and prison disciplinary record.
Additionally, inmates’ families and friends and the public can access information
through the Department’s Constituent Services Office. The Constituent Services
Office’s purpose is to address the concerns of the general public and inmates’
friends and family regarding confinement and supervision conditions to reduce
inmate litigation, increase agency transparency, and improve department
operations and outcomes. The Constituent Services Office communicates with
the Department’s executive staff and facility supervisory correctional staff to
resolve issues such as denied visitation and to explain calculated release dates.
The Constituent Services Office also provides guidance to individuals who are
unfamiliar with the corrections system on such matters as how to send an
inmate mail, what an inmate can have as property, and parole supervision
issues.
6. The extent to which the Department has been able to investigate and
resolve complaints that are within its jurisdiction.
The Department receives complaints from its inmates and the public. Specifically:
• According to department policy and an interview with department staff,
inmates shall first attempt to resolve their grievances informally through
either a discussion with corrections staff or by submitting the grievance in
writing to corrections staff. If unresolved, the inmate may submit his/her
complaint to the correctional officer III on his/her specific unit. If the
grievance cannot be resolved informally, then an official formal grievance is
filed with the unit’s grievance coordinator, to be decided by the deputy
warden. If the inmate is still unsatisfied, he/she may then file a formal
grievance to be decided by the warden. The final step an inmate may
pursue is to appeal to the director. The inmate must file a grievance appeal
form, which is forwarded with all previous investigations material and
responses to the central office appeals officer, who will review and
investigate the appealed grievance on behalf of the director.
According to the Department, it received 4,235 formal inmate grievances in
fiscal year 2010. The majority of grievances concerned inmate
page 17
Office of the Auditor General
property—1,600 grievances—and healthcare—761
grievances. Seventy-seven percent of formal
grievances, or 3,149, were resolved at the facility
level. As illustrated in Table 2 (see page 17), 986
grievances were appealed to the director. However,
according to department data, most grievances
appealed to the director were denied. For example,
the director denied 83 percent of the healthcare
grievances that were appealed and 96 percent of
the non-healthcare grievances.
• The Department’s Constituent Services Office
investigates concerns of the general public and
inmates’ friends and family regarding a variety of
issues such as visitation, mail, time computation,
and healthcare. In fiscal year 2010, the Constituent
Services Office reported handling 30,650 public
inquiries. Almost 97 percent of these inquiries were
resolved through referral to the lowest level of
command at the prison facility or through
information referral or explanation by a Constituent
Services Office staff member. The remaining 1,052
inquiries—3.4 percent—required additional
investigation by the Constituent Services Office to
resolve.
7. The extent to which the Attorney General or any other
applicable agency of state government has the authority to prosecute
actions under the enabling legislation.
According to A.R.S. §41-192, the Attorney General’s Office provides legal services
to the Department for various issues. According to Attorney General staff, its
Office offers advice on the effects of sentencing statutes and the implementation
of Department Orders that affect inmates. Further, the Attorney General represents
the Department in matters concerning death penalty appeals. According to the
Department, it also advises the Department on matters concerning public records
requested by the media.
Additionally, the Department refers approximately 200 to 250 cases annually to
county attorneys. These cases typically involve criminal acts alleged to have been
committed in or on prison property by inmates, department employees, or
visitors. These cases include charges such as homicide, aggravated assault
against staff, and promoting prison contraband, such as narcotics or cellphones.
As of May 2011, 240 open cases were being reviewed or prosecuted by the
county attorneys in the State. According to the Department, in fiscal year 2010,
Table 2: Grievances Appealed to Director
Fiscal Year 2010
Source: Auditor General staff analysis of unaudited
department grievance data for fiscal year 2010.
Healthcare
Grievances
Other
Grievances
Decided in
favor of the
inmate 24 21
Decided
partially in
favor of the
inmate 16 1
Denied 330 565
Returned as
incomplete
and
unprocessed 28 0
Returned to
unit to address
issue 0 1
Total 398 588
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State of Arizona
the Department reimbursed four counties a total of more than $111,000 for
prosecuting cases.1
8. The extent to which the Department has addressed deficiencies in its
enabling statutes that prevent it from fulfilling its statutory mandate.
According to the Department, it has sought legislation regularly over the past
several years. From fiscal years 2006 through 2011, the Department proposed
30 bills, 15 of which were enacted. Some key pieces of legislation introduced
and enacted were:
• Laws 2007, Ch. 248—This law revised statute to expand the list of persons
prohibited from engaging in sexual contact with inmates to include not just
department employees and contractors, but also official visitors, volunteers,
and agency representatives. It also broadened the definition of sexual
contact and made it a Class 5 felony for a person to engage in sexual
conduct with an adult inmate. According to the Department, the intent of
this revision was to bring Arizona law into alignment with the federal Prison
Rape Elimination Act of 2003. This act required the development of
standards for the detection, prevention, punishment, and reduction of
prison rape and called for a zero-tolerance policy regarding rape in prisons,
jails, and other confinement facilities. It also standardized the collection and
dissemination of information on the problem of prison rape for federal data
collection.
• Laws 2010, Ch. 56—This legislation changed the definition of contraband
in statute to include a “wireless communication device” and “multimedia
storage device.” Possession of a cellphone on prison property is now a
Class 5 felony. According to the Department, this legislation was designed
to combat the problem of inmates obtaining contraband cellphones and
engaging in unmonitored criminal communications.
• Laws 2010, Ch. 57—This law established the Community Corrections
Enhancement Fund, and increased inmate fees for community supervision,
parole, Global Positioning System (GPS) monitoring, and home arrest. The
charge for supervision increased from $30 to $65 per month, along with
additional increases in the charges for home arrest and GPS-monitored
parolees.
The Department has not yet determined if it will propose legislation in the 2012
session, but reported that it plans to continue to work with the Governor’s Office
and Legislature to privatize inmate healthcare services as required by Laws
2011, Ch. 278 (see Sunset Factor 12, pages 19 through 21, for more information).
It will also continue to work with stakeholders to implement Laws 2011, Ch. 33,
1 According to A.R.S. §31-227, the Department bears the cost of reimbursing the counties for prosecution.
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Office of the Auditor General
which specifies that inmates sentenced to terms of 1 year or less in the
Department’s custody serve their sentences in the county jails unless the sheriff
of the sentencing county has an agreement in place to reimburse the Department
for the inmate’s sentence. Laws 2011, Ch. 33, will become effective July 1, 2012.
9. The extent to which changes are necessary in the laws of the Department to
adequately comply with the factors in the sunset law.
Audits conducted as part of the Department’s sunset review did not identify any
needed changes to its statutes. However, the Office of the Auditor General’s
September 2010 performance audit on prison population growth discusses a
number of options for addressing Arizona’s growing prison population, some of
which may require statutory changes (see Report No. 10-08). Options presented
for legislative and department consideration included expanding the State’s
prison system; diverting more nonviolent, low-risk offenders from prison and/or
reducing the term they serve; expanding the use of nonprison alternatives; and
creating a sentencing commission. Some of these options would require changes
to the State’s sentencing laws.
10. The extent to which the termination of the Department would significantly
affect the public’s health, safety, or welfare.
Terminating the Department would significantly affect the public’s safety. The
Department provides confinement and community supervision for felony offenders,
a vital service that increases the public’s safety. Imprisonment contributes to
public safety by removing felony offenders from society and preventing them from
further victimizing the public.
11. The extent to which the level of regulation exercised by the Department
compares to other states and is appropriate and whether less or more
stringent levels of regulation would be appropriate.
The Department is not a regulatory agency; therefore, this factor does not apply.
12. The extent to which the Department has used private contractors in the
performance of its duties as compared to other states and how more
effective use of private contractors could be accomplished.
The Department uses private contractors to provide various services, including:
(1) privately operated prisons that perform many functions related to housing
inmates, (2) inmate food service, (3) inmate health services, (4) inmate work-based
education, and (5) prison security perimeter maintenance.1 The
1 Laws 2011, Ch. 278, requires the privatization of inmate health services. As of August 2011, the Department was
developing a Request For Proposals.
page 20
State of Arizona
Department’s use of private contractors has increased since fiscal year 2000. In
fiscal year 2000, the Department’s privatized services totaled approximately
$58.6 million, or about 10 percent of the Department’s expenditures. In fiscal
year 2010, privatized services totaled approximately $334.2 million, or about 34
percent of the Department’s expenditures, including transfers to the Arizona
Health Care Cost Containment System (AHCCCS) for inmate healthcare.
In some cases the Department’s use of private contractors generates revenue.
For example, the Department contracts with a private vendor to operate stores
for inmates at each of its prison complexes. These stores sell items such as
food, toiletries, and tobacco products for inmates’ use. A.R.S. §41.1604.02
allows the Department to earn a profit on inmate store sales, which it received
through a contractual 13.5 percent commission on the cost of items sold.1 In
fiscal year 2010, the Department received more than $3.6 million in commissions
for the Department’s Inmate Stores Proceeds Fund. In addition, the Department
has used a private vendor for inmate phone services since 1999. In fiscal year
2010, this contract resulted in nearly $3.7 million in commissions for the
Department’s Central Offices Activities and Recreation Fund.
Contracting for correctional programs and services has been in place for many
years and is not uncommon. According to a 1996 survey and report on
privatization and contracting in corrections, every state except Colorado
reported that they contracted for some type of program or service.2,3 For
example, similar to Arizona, 32 other states contract for private prisons.4
To obtain more current information on states’ privatization efforts in corrections,
auditors contacted three states comparable to Arizona based on prison
populations—Michigan, Virginia, and North Carolina.5 Based on information
reported by these three states, Arizona appears to contract in more areas. For
example, similar to Arizona, these three states contracted for health services,
pharmacy supplies or services, and telecommunications. However, unlike these
states, only Arizona contracts for food services at all of its prisons, although
Virginia reported contracting for food services at 3 of its 42 prison facilities.6 In
1 The Department received a 13.5 percent commission on all inmate store sales with the exception of clothing sales, for
which it received a 10 percent commission. The Department awarded a new inmate stores contract in August 2011,
which provides for a 16 percent department commission on the cost of items sold at inmate stores.
2 U.S. Department of Justice, National Institute of Corrections Information Center. (1996). Privatization and contracting in
corrections: Results of an NIC survey. Longmont, CO: Author.
3 As of 1996, all states but Colorado contracted for some type of service or program. Auditors reviewed Colorado’s
Department of Corrections Fiscal Year 2011 budget request and verified that they now contract for various correctional
services and programs.
4 Bureau of Justice Statistics. (2010). Prisoners in 2009 [NCJ 231675]. Washington, DC: United States Department of
Justice, Office of Justice Programs.
5 States were selected based on their prison population as of December 31, 2009, according to the Bureau of Justice
Statistics Bulletin, Prisoners in 2009. Arizona’s prison population was 40,627 as of December 31, 2009. Auditors
contacted officials from the following three states: Michigan (prison population of 45,478), North Carolina (39,860), and
Virginia (38,092).
6 Michigan reported that they plan to issue a Request For Proposals to privatize food services in September 2011.
page 21
Office of the Auditor General
addition, compared to these three states, only Arizona contracts for inmate work-based
education.
Additionally, the Department will soon be contracting for additional private prison
beds and inmate healthcare. Laws 2009, 3rd S.S., Ch. 6, §37, requires the
Department to award a contract for 5,000 in-state prison beds. The Department
expects to award a contract after September 16, 2011. In addition, Laws 2011,
Ch. 278, requires the Department to privatize all correctional health services at a
cost that does not exceed the capped fee-for–service schedule adopted by
AHCCCS. As of August 2011, the Department was developing an RFP for this
service.
At least one Arizona correctional privatization effort has not been successful.
Specifically, Laws 2009, 3rd S.S., Ch. 6, §33, required the Arizona Department of
Administration (ADOA), in consultation with the Department, to issue a Request
for Information (RFI) to determine the feasibility of a concession agreement
allowing a private vendor to operate all or part of the prison system.1 The
legislation stated that this privatization should result in an annual cost efficiency to
the State, and that the cost efficiency should be split between the State and the
private vendor. After the Department presented information to the Joint Committee
on Capital Review (JCCR), JCCR gave a favorable review to the RFI for a State
Prison Concession Agreement per A.R.S. §38-431.03(A)(2), with modified
provisions. Consequently, ADOA, in consultation with the Department, issued an
RFI limiting those prisons that could be privatized to prisons that exclusively
housed minimum-and medium-custody inmates. However, based on the four
vendor responses received, ADOA and the Department determined that a
concession agreement was not feasible as allowed under statute and as the
prisons are currently structured. Consequently, Laws 2009, 3rd S.S., Ch. 6, §33,
was repealed by Laws 2010, 7th S.S., Ch. 6, §25.
Going forward, potential privatization areas should be carefully evaluated to
ensure the benefits of contracting outweigh the costs. Information from the other
states auditors interviewed point to the importance of evaluating the cost-effectiveness
of privatizing a service or function versus performing the service or
function in house. For example, a North Carolina official indicated that the state
no longer contracts for prison maintenance or private prison beds largely because
it cost more to contract for these services than for its corrections department to
perform them. Security issues were also a factor in eliminating North Carolina’s
contract for private prison beds. Similarly, the September 2010 Office of the
Auditor General report on prison population growth recommended that the
Legislature consider directing the Department to further study and analyze the
costs for the State to build and operate prisons compared to contracting with
private prisons to determine which option would be more cost-effective while still
ensuring public safety (see Report No 10-08).
1 This excluded Arizona State Prison Complex—Yuma.
Office of the Auditor General
The Department’s performance was analyzed in accordance with the statutory
sunset factors. Prior work on prison population growth (see Auditor General
Report No. 10-08) and department oversight of security operations at both
private and state-run prisons (see Auditor General Report No. 11-07) provided
information for this report. Auditors also reviewed the Department’s Web site,
including its Inmate Datasearch feature, daily count sheets, department-prepared
reports summarizing inmate grievance and constituent services
information, the Department’s Strategic Plan for FY 2012-2016, various reports
and documents, department policies and procedures, and various session
laws and statutes, and interviewed department management and staff as well
as staff at the Attorney General’s Office and State Procurement Office. In
addition, auditors reviewed reports from the Commission on Privatization and
Efficiency and the Fiscal Years 2010-2013 Master List of State Government
Programs; reviewed Privatization and Contracting in Corrections: Results of an
NIC Survey and the Bureau of Justice Statistics Bulletin Prisoners in 2009; and
compiled and analyzed information about the Department’s finances from the
Arizona Financial Information System (AFIS) Accounting Event Transaction File
for fiscal years 2009 through 2011 and the AFIS Management Information
System Status of General Ledger—Trial Balance screen for fiscal years 2009
through 2011.1,2 Finally, auditors contacted procurement staff in the Michigan,
North Carolina, and Virginia Departments of Correction to discuss the extent of
each state’s efforts to privatize services. These states have prison populations
similar in size to Arizona’s.
To determine if the Department complied with inmate store requirements,
using a June 15, 2010, inmate store price list, auditors compared prices for 15
items sold at the Department’s inmate stores to similar retail products sold in
the Phoenix area or on retail Web sites when prices were not available locally.3
Fourteen of the items were selected for review because they represented high
volume and high dollar sales for the period April 1, 2010 through September
30, 2010. One additional item was selected because it had been the source of
inmate complaints. Auditors also reviewed prison complex monthly bank
statements and corresponding documentation for July 1, 2009 through June
30, 2010; judgmentally selected 124 expenditure payments and compared
these expenditures to statutory and department requirements; interviewed
department administrators and staff; and examined department contract files
and request for proposals documents.
1 U.S. Department of Justice, National Institute of Corrections Information Center. (1996). Privatization and
contracting in corrections: Results of an NIC survey. Longmont, CO: Author.
2 Bureau of Justice Statistics. (2010). Prisoners in 2009 [NCJ 231675]. Washington, DC: United States
Department of Justice, Office of Justice Programs.
3 Auditors also compared the price for 1 of the 15 items, a television set, to a price from another state’s inmate
store vendor who supplies the same television set to its inmate population.
Methodology
This appendix provides
information on the methods
auditors used to meet the
audit objectives.
This performance audit was
conducted in accordance
with generally accepted
government auditing
standards. Those
standards require that we
plan and perform the audit
to obtain sufficient
appropriate evidence to
provide reasonable basis
for our findings and
conclusions based on our
audit objectives. We
believe that the evidence
obtained provides a
reasonable basis for our
findings and conclusions
based on our audit
objectives.
The Auditor General and
staff express appreciation
to the Department of
Corrections’ (Department)
Director and staff for their
cooperation and assistance
throughout the audit.
APPENDIX A
page a-i
State of Arizona
Auditors’ work on internal controls focused on the Department’s processes or
procedures for ensuring compliance with inmate store statutory requirements related
to pricing and profits. Conclusions on this work are included in Sunset Factor No. 2,
pages 13 through 14. Since information system data was not significant to auditors’
objectives, auditors did not conduct test work on information system controls.
page a-ii
AGENCY RESPONSE
Performance Audit Division reports issued within the last 24 months
Future Performance Audit Division reports
Arizona Department of Veterans’ Services—Veterans’ Donations and Military Family Relief Funds
Arizona Department of Veterans’ Services and Arizona Veterans’ Service Advisory Commission—Sunset
Factors
10-08 Department of Corrections—
Prison Population Growth
10-L1 Office of Pest Management—
Regulation
10-09 Arizona Sports and Tourism
Authority
11-01 Department of Public Safety—
Followup on Specific
Recommendations from
Previous Audits and Sunset
Factors
11-02 Arizona State Board of Nursing
11-03 Arizona Department of Veterans’
Services—Fiduciary Program
11-04 Arizona Medical Board
11-05 Pinal County Transportation
Excise Tax
11-06 Arizona Department of Veterans’
Services—Veteran Home
11-07 Department of Corrections—
Oversight of Security Operations
09-09 Arizona Department of Juvenile
Corrections—Suicide Prevention
and Violence and Abuse
Reduction Efforts
09-10 Arizona Department of Juvenile
Corrections—Sunset Factors
09-11 Department of Health Services—
Sunset Factors
10-01 Office of Pest Management—
Restructuring
10-02 Department of Public Safety—
Photo Enforcement Program
10-03 Arizona State Lottery
Commission and Arizona State
Lottery
10-04 Department of Agriculture—
Food Safety and Quality
Assurance Inspection Programs
10-05 Arizona Department of Housing
10-06 Board of Chiropractic Examiners
10-07 Arizona Department of
Agriculture—Sunset Factors